Exiting your business:
Pros and cons
The advantages of a float include:
- you can get access to capital to enable you to develop your business
- shareholders can realise part of their investment in the company. Venture capitalists, for example, will make investments in companies that they hope will develop to the stage that they can be floated an so enable the venture capitalists to recoup their investment
- once your shares are traded they are easier to buy and sell, which will make them more attractive to investors
- if you intend to make acquisitions, you can offer shares in your company as consideration instead of, or as an alternative to, cash
- employees may perceive a greater value in any shares or share options that they have been granted
- the greater status afforded to listed companies may be good for business
The potential disadvantages of a float include:
- it will enable you to sell some of your shares but you will probably need to retain the rest for some time
- the value of your business may be less than for a trade sale, especially if you are trading in an unfashionable or unexciting market
- only certain businesses are suitable for floating - you need strong and stable earnings, good prospects for growth and an impressive management team in order to attract investors
- you will lose some control over your business as you will have the interest of other shareholders to consider
- you will need to comply with additional regulatory requirements
- the initial costs can be substantial, say £150,000 to £350,000 in fees for even a small company, and you will have to pay commission on the amount raised of, say, 2% to 5%. There will also be ongoing costs specifically relating to the listing and hidden costs relating to the demands on management time
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Where next?
- Planning your exit
- Selling your business
- Exiting a partnership or minority shareholding
- Family succession
- Closing down
- Tax issues
General...
- Contact us about this issue
- Read about how we can help you & your family
- Request a meeting with us
