Years ago, I worked with a CEO whose publicly traded company was acquired by another in its industry. At the time, he swore that he would never head another public company – in part, because he loathed conducting quarterly conference calls with the buy- and sell-side. (For the record, he kept his vow.)
While today, many private companies have greater opportunities to attract private funding – think venture capital and private equity – there are at least three compelling reasons to go public:
#1: Broader reach for your company’s business strategy, products and services: The initial public offering creates a “news peg” or reason for the media and the sell-side to write about your firm. Over time, the public company itself has compelling new ways to tell its story to Wall Street and other stakeholders. For example, the CEO’s letter to shareholders in the annual report is a great way to remind employees of your company’s business goals and successes – and one of the best information sources for a prospective employee trying to assess corporate culture and potential fit if he or she takes a job with your firm.
#2: Operational discipline: In advance of an IPO, a company often steps up its reporting and risk management practices to meet the requirements of quarterly and annual financial reporting. Corporate governance practices (e.g., board diversity, election requirements) are another area where public companies can excel.
#3: Cash is king: To state the obvious, an IPO can generate a stronger cash cushion for the next step in your company’s growth, whether that requires an investment in marketing, organic growth opportunities and/or an acquisition.