M & A Attorney

In mergers and acquisitions (M&A), going public through an IPO or reverse merger is a valuable and flexible tool that can increase profits and lower the cost of capital. If you want to acquire other companies later on for stock or cash, you will want to be public.

See our Video M&A Uses of Going Public with an IPO or Reverse Merger 

Sellers: Increase Your Valuation
Being public may increase your valuation in a transaction where you are being acquired. You can file a confidential S-1 under the JOBS Act may put pressure on a buyer. You can use this to “test the waters” for an IPO. Buyers will have to compete with your IPO price. If you sign a letter of Intent with an underwriter, you can force buyer to make you an offer. Naturally, the price will be increased as you always have the option of the higher priced IPO.
If you are selling to public company, the public company that wants to buy you will be more comfortable if your financial reporting is already up to SEC standards. Many public companies looking for acquisitions will want sellers to have audited financial statements.
As the expense of these audited statements is a big part of the cost of being public, why not do an IPO as you have already incurred a large part of the total cost? 
Establish Value for Taxes
You may want to establish a value for the company for estate tax or other purposes, such as dressing up your personal financial statements. You may want a public market to sell securities to pay estate taxes, or have the option of selling stock to pay estate taxes instead of facing a fire sale of the company.
Key Employees
You may want to keep the loyalty of key employees in your company or a company you are buying – offer them stock options in your public company.
Reduced Overall Financing Costs
You may want to reduce your overall financing costs and find that equity is a cheap part of the mix. You can go public to increase your equity base. You may want to increase your equity base after incurring a large amount of debt in an LBO. You may want to raise money to reduce or pay off debt incurred during a leveraged buyout.
You may want to offer the sellers some securities, (common, preferred or debt) to reduce the cash used in buying the company. Sellers naturally want these securities to be liquid.
You may want to buy out dissident or troublesome shareholders.
If your company is in an industry that is being overvalued by Wall Street, you may want to take advantage of this bubble pricing.
You may do an IPO instead of getting vulture capital. If venture capital companies are offering you inadequate terms or trying to impose agreements that put you at a disadvantage, you may want to seek an IPO instead of venture capital. Use an IPO to break out of venture capital covenants, such as right of first refusal on sales. Typically, these end after an IPO. You may believe that the public market will offer you more attractive valuations than venture capitalists. Your venture capitalists or other investors may demand liquidity. You yourself may want liquidity or the ability to create liquidity when you want it. You may want to reduce control of outside investors and venture capitalists.
If leverage is crushing the company, you may want equity from an IPO.
More Options
You might do an IPO if you want more options for future financing
If your lender insists, you may go public. A bank lender may want to decrease its loan risk.
You may want to do an IPO if the current control shareholders want to keep control.
An IPO can be used to spin off assets, or if the company wants to spin off or split up.
An IPO can facilitate the use of earn out provisions to make both the buyer and seller happy with the terms of a deal.
Popular Industry
In considering an IPO, you need to look at the popularity of your industry, and how the IPO market is likely to be doing by the time you are trading.
This is not legal or investment advice of any kind. Seek competent advice from qualified attorneys and investment bankers. Your situation may vary. The more you know about finance and business, the more you can. Profit.
Get the Data You Need from www. Reverse-merger.info, or
www. Go-Public. Info
Call me, John Lux at (240) 200-4529

Questions – email me at Lux.investor@ gmail.com

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