Floating a business is often the ultimate ambition for a business owner and comes with game changing financial upsides. The majority of people believe that it costs millions to achieve this and is out of reach from all but much larger businesses. That's simply not the case."
As an exit strategy, floating a business is a totally different proposition to selling a business. Arguably, it shouldn't be seen as an exit strategy at all, as your business will likely need your leadership for a minimum of 2 to 3 years. That said, simply selling your business can take a very long time, and most deal structures require the owner to remain in a position for close to this time period anyway. The significant benefits of a public listing could make that 2 to 3 years well worth it, and a fascinating part of your entrepreneurial journey too.
The most obvious benefit is the ability to achieve a MUCH higher price for your business than you would otherwise achieve by selling your business privately. But there are many more significant advantages besides this.
Selling is a binary process. You have either sold your business or you haven't. Floating a business gives you total flexibility. You can stay in control or step down, at a time that suits you. You can sell some of your shares, perhaps to fund something you really want or need in your life, as and when you need it. Or you can eventually sell all of them.
Significantly, as a publicly listed company you will have funding, in the form of your own currency, that you can use to grow your business, further increasing the value of its shares. You have access to different financial instruments, you can raise capital for growth and you can recruit a higher calibre of people and skill sets that are attracted to that fact that you are a publicly listed company. You may also find that you can tender for contracts that would have otherwise be out of reach.
Most SME's are put off, either by the process of floating or the cost of floating. When sticking to conventional methods, this is what causes many to fail to achieve their aim when they do give it a go.
Paul Farmer Investments has two different routes to Public Listing, both of which massively reduce the cost and time required to getting a business to flotation. The nature of your business will determine which might suit you best.
The first is what we refer to as a 'Direct Listing' where we focus on taking your business and floating it directly on a public exchange. This is a creative but proven model and avoids a huge amount of the cost and time that it conventionally takes to take a company public. The net result is your company, on a public market, with its own identity, and free to take itself forward from there.
For those businesses that don't quite fit the criteria for the Direct Listing, we have a second strategy. We have access to to already publicly listed companies that are looking to acquire as part of their own growth strategy. Their very growth strategy is 100% focused on growth via acquisition.
This 'Reverse Merger' process is the easiest way to achieve the vast majority of the benefits of floating your own business, whilst dramatically decreasing the risk, cost and arduous process of listing. It is much faster, much cheaper, and much less stressful fro the business owners. Whilst floating a company on the market itself takes huge due diligence, time and cost; an already public company is effectively free to acquire any business it likes. Via this strategy, your business would be avoiding the very tripping points that prevent so many companies from listing themselves.
The lack of wealth distribution is the cause for much of the world’s inequality and under lying problems. 99% of all firms in the USA are SME business owners who employ less than 500 people, yet they work a lifetime for a hopeful reward of a retirement sale, if they, or the company make it that far.
During this time, they risk their own financial future and cannot access the latent capital that is held in the private company shares
Another alternative...
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I promote a much better way of working, where you can have (and can keep) your cake whilst enjoying eating it at the same time, let me introduce the democratic IPO.
Broadly, we create a group of similar companies in a similar sector and reverse the shares of each company into a holding company (like a roll up but with no sharing of platforms, premises or anything else). Each company remains independent from the others but has one seat and one vote at the holding company table.
Above this, we add a listed holding company with a professional board, who deal with stock market compliance, investors information and financial reporting. Essentially, all done on your behalf.
You share best practice with your fellow PLC company owners at regular virtual meetings, with your competitors now encouraged by you to do well, as the share price is now dependant on group success.
The listing creates a capital event, which after an initial lock up period can be freely traded on the markets.
Why?
This is a unique type of collaboration where a group of SMEs from similar and adjacent industries join forces and list publicly on a global exchange and then grow further through organic and inorganic activities.
To join an IPO, each business owner exchanges shares in their business for public-listed stock in the central holding company. Each business must be mature, profitable and generally debt-free with similar or complementary services and be run by highly talented leaders in their field. As part of the process, each successful business owner is given the freedom to continue to run their business in their own way, helping to ensure that the talent that built the business in the first place continues to build the business in the future.
What are the benefits for SME owners?
This model was created for SME owners to empower and enable them to transition their business from small, founder-lead into a large multinational company. It enables scale, unlocks liquidity, but unlike “normal” mergers and acquisitions (“M&A”), it allows owners to maintain control over their business.
1. Bigger, faster
Achieve operational and balance sheet scale instantly, which provides access to larger contracts and clients whose strict procurement guidelines usually preclude SMEs from the bidding process.
2. Access to capital
The model offers a smooth and steady risk managed route to accessing capital while allowing business owners to retain full control of their operations.
3. Complementary skills
Business owners are incentivised, through their equity interests and a transparent earn-out structure, to innovate and collaborate by tapping on to complementary skills within the PLC.
4. Grow through acquisitions
Business owners are also able to pursue inorganic growth opportunities under the model.
5. Access to talent and services
The central holding company offers corporate functions support to ease the transition from the private-to-public market.
6. Pointing to the PLC
Being part of a PLC means when pitching for larger contracts/tenders there will be great credibility created by pointing to the PLC and saying we are part of XYZ Plc with a market capitalisation of £50-100m.
7. Recruit & Retaining the Best Talent
Whilst you can offer shares in a private LTD to key people it is difficult to value them & they are not liquid. In a PLC you can grant share options to your key people and they can see (& sell easily) the value of their shares. This can be used to attract & retain the best talent in your industry.
8. Wealth Creation
Because of the vast sums of capital available & liquidity, public companies tend to be valued much more than private entities. In addition, a diverse group of businesses is reduced risk from an investment point of view. So, when you decide it’s time to exit, you sell your shares at hopefully a much greater value than what your business is worth today.