Expanding our company in any of the for-mentioned ways can have many advantages for our owners and employees. In order to determine which expansion option to take we must/will weigh the pros and cons of each. Going public through an PIP After our last annual strategic planning session we have a clear view of where we will be in three years and we agree on key strategies for building our future business. “Going public” is an easy way for us to raise cash and will open many financial doors. Our most recent statement of income declares we have an annual net Income of $59,167.
Even though our Income may not appear strong enough for an PIP, qualification for being listed have changed. Strong financial are no longer necessary. Because our underwriters think an PIP will be a success for us, we can and will be listed. Let’s consider the strengths and opportunities of going public through an PIP. Even with our current debt, going public will grant us access to capital through selling shares. Our debt-to-equity ratio will improve after going public, making for more promising financing engagements.
By becoming a publicly traded company we can offer stock as a bonus, incentive, or part of an employee interact. This will help to ensure the retention of some important employees. We can also use this equity to purchase other businesses. The shares that we own after the PIP can be turned Into cash at our petition, and we can use that money to pay off debts or acquire new businesses. Obviously we can gain a considerable amount of prestige by being on a major stock exchange. Because of the media attention, we will have public appeal.
Our stock will be looked at by millions of people, potential shareholders, analysts, and others. By becoming a publicly traded company, in the ease that our shares do drop, it will be much easier to sell our shares under proper public disclosures. The last and leading benefit of going public is stock value appreciation. If our company continues to perform well, the value of our stock will theoretically increase. Most of the weaknesses and threats of going public are contributed to tighter formalities.
The financial weaknesses of this PIP include the incurring of fees, and will require significant capital on our end. These fees vary from legal, accounting, underwriting, and printing cost. All of which are necessary to create our offering. There are also disclosure weaknesses which are caused by Serbians-Solely compliance; there are costs associated with remaining these compliances. We will have to Increase our falling, reporting and disclosure procedures. Our company will also be vulnerable to stock price manipulation.
Individuals can manipulate share prices through processes like pump and dump, wash trade and would mainly be influenced by the growth of the profits our company generates. Acquiring another organization in the same industry We have examined the parameters of going public through an PIP; now let’s look at hat we will gain and what it will cost to acquire another business in the same industry. Acquisitions can be risky, but if done properly they can make us a more competitive, cost-efficient company. Acquisitions are attractive to us because speed of growth is our main priority right now.
With acquisitions we will immediately increase our market area, increase market share, and eliminate some competition. Most companies that are up for grabs are under financial distress. As long as the price paid for the business is not too high, this will make for a great synergy opportunity. Our goal is perfect synergy: our company + new company = an even greater company. The advantage of this equation is revenue growth. This revenue growth can be attributed to the new geographic markets that will be opened up to us.
We will also benefit from cross-selling to our customers and the customers of the business we purchase. We will have access to more trucks and equipment which will also allow us to broaden our daily operations and clientele database. Other notable advantages of an acquisition are cost savings and economies of scale. The disadvantage with synergy is sometimes they do not deliver the returns that are expected. If this acquisition does not meet the rate of return that we are aiming for then the price we paid for the company was too high.
We then will suffer a lost in capital. A financial devastation of that magnitude may be the downfall of our company. With an acquisition we must have aggressive planning so that all issues with things like internal development are addressed and worked out. This should be done because one of the main threats of acquisitions is management change challenges. We must make sure that there are not duplicate manager roles and we ill most likely have to change the hierarchy of management. Naturally the employees of the business we acquirer will feel some concern about us.
They will have questions about changes they are to face in their employment, pay, and benefits. Their uncertainty of our intentions and strategy could cause problems with integration. Also, the customers and equipment suppliers that we adopt with this purchase may not want to continue a relationship or may be concerned about a change in the quality of our services. The loss of one or both of these players could be a financial disappoint for our acquisition. Urging our business with another organization Mergers and acquisitions go hand and hand.
The difference between the merger and the acquisition is that in the acquisition we would be absorbing a distressed company or a smaller company. Most of the same advantages that we will have with acquisition we can have with a merger. Ideally our merger will involve us making a mutually beneficial decision with relatively equal company to become a single company. With the merger we can benefit from reduced expenses, a greater range of products and services, surge in employee competency, and lastly access to more customers.
Similarly to acquiring a new business, some of the disadvantages include during expansion No matter what expansion option we choose, if we decide on globalization we must factor in the disadvantages and the effect it will have on us financially. Doing business in other countries requires us to know the laws, taxes, and monetary demands of those countries. General education level is definitely something to ponder during country selection. If we decided to operate outside of the United States we must choose a place that would not require us to outsource Jobs because his could become costly.