Email:
Password:
Forgot password?
Register
 
 


Article: Publicly Listing a Company, the Advantages & Disadvantages

By Len McDowall, Managing Director of Integral Capital Group

 

A company's reasons for deciding to publicly list on the stock exchange often include the ability to get access to the capital markets for financial expansion and acquisitions.  They usually have invested many years of plowing back profits and guaranteeing borrowings and rather than sell out, they wish to remain with the company and be part of its future growth.

 
Even if your business is suited to floatation, it may not be the right choice for you.  There are a number of key advantages and disavantages to weigh up:-
 
Advantages:
 
  • You get access to new capital to develop the business
  • A float makes it easier for you and other investors to realize your investment
  • You can offer employees extra incentives by granting share options
  • Being a public company can provide customers and suppliers with added reassurance
  • Your company may gain a higher public profile, which can be good for business
  • Having your own traded shares gives you greater potential for acquiring other businesses, because you can offer shares as well as cash.
  • Personal guarantees of directors are not usually required for borrowings
 
Disadvantages:
 
  • Your business may become vunerable to market fluctuations, which are outside your control.
  • If market conditions change during the floatation process you may have to abandon the float.
  • The costs of floatation can be substantial and there are also ongoing costs such as higher professional fees.
  • You will have to consider shareholders interests when running the company - which may differ from your own objectives.
  • You may have to give up some management control of the business and ultimately there's a risk that the company could be taken over.
  • Public companies have to comply with a wide range of additional regulatory requirements and meet accepted standards of corporate governance.
  • Managers could be distracted from running the business by the demands of the floatation process, and by dealing with investors afterwards.
 

It generally takes 6 months to publicly list a company on the stock exchange although the time period can range from 3 months to 2 years.  You will need a range of professional advisors to assist with the legal, financial, accounting and valuation aspects of publicly listing plus prospectus preparation, underwriting of shares and assistance with IPO Plans.

 

To learn more about the advantages and disadvantages of a public listing, contact your stockbroker or establish a relationship with an investment banking or corporate advisory firm who specializes in these opportunities.  There is a lot of free information on the ASX website.  Go to www.asx.com.au

 
© Len McDowall, Integral Capital Group        21st September, 2007
www.integralcapital.com.au
 
About Len McDowall, Managing Director of Integral Capital Group Pty Ltd
 

Len McDowall was previously inaugural Chairman and Managing Partner of Bird Cameron Chartered Accountants (now known as RMS Bird Cameron), which employed 1000 people in 50 offices in Australia and Hong Kong.  Len, who established Bird Cameron's mergers and acquisitions division, has extensive experience in all facets of financial management with a particular emphasis on structuring and negotiating joint ventures and capital raisings. Len and his partners established the Integral Capital Group in 1990 which specializes in mergers and acquisitions, public floatation's and capital raisings. Len McDowall is an expert in capital and debt raising and has successfully completed hundreds of transactions in these fields.

 

Len McDowall is also a respected and active author on the Internet syndicating his informative articles on investment, capital raising, private equity funding, Pre-IPO Opportunities, IPO Plans, Wholesale Investing, Floating your Company on the ASX, and How to Write a Business Plan to raise capital, a 12 part series.  Len McDowall has achieved 'Expert Author' status on many author/article sites. Read insightful views on Len McDowall Blog or connect on Len McDowall Linkedin.