IPO — Why?

Moti­ves for an IPO — One of the pri­ma­ry pro­blems of Ger­man SMEs is insuf­fi­ci­ent equi­ty capi­ta­liz­a­ti­on. Alt­hough an IPO (also known as going public) is an excel­lent way of rai­sing equi­ty capi­tal, SMEs are reluc­tant to take advan­ta­ge of it. In addi­ti­on to the lack of infor­ma­ti­on about an IPO, ano­t­her rea­son is the pre­do­mi­nan­ce of fami­ly-owned or owner-mana­ged com­pa­nies among SMEs. Such com­pa­nies find it dif­fi­cult to inclu­de a lar­ge num­ber of new share­hol­ders in the pre­vious (rather clo­sed) cir­cle of owners, to publish infor­ma­ti­on on busi­ness deve­lo­p­ment on a regu­lar basis and to give exter­nal accoun­ta­bi­li­ty.

Des­pi­te the­se argu­ments, a num­ber of medi­um-sized com­pa­nies that are still fami­ly-owned are lis­ted on the stock exchan­ge. Obvious­ly — as sur­veys of lis­ted com­pa­nies show — the aspects of an IPO that are per­cei­ved as nega­ti­ve are (clear­ly) over­esti­ma­ted. Of cour­se, the capi­tal incre­a­se for the IPO requi­res an expan­si­on of the cir­cle of share­hol­ders. Howe­ver, the influ­ence of the for­mer owners on the com­pa­ny is not end­an­ge­red as long as they hold the majo­ri­ty of shares. On the con­tra­ry, streng­t­he­ning the equi­ty base ensu­res the con­ti­nui­ty and inde­pen­dence of the com­pa­ny for the pre­vious owners. The infor­ma­ti­on obli­ga­ti­ons ari­sing from the stock exchan­ge lis­ting and the reac­tions of inves­tors reflec­ted in the share pri­ce deve­lo­p­ment repre­sent an effec­ti­ve cor­rec­ti­ve for a sus­tainab­le value-enhan­cing cor­po­ra­te poli­cy. And it is the for­mer owners who bene­fit most from this.

Irre­spec­ti­ve of this, the entre­pre­neu­ri­al aspects should be in the fore­ground when deci­ding on an IPO. The (signi­fi­cant) impro­ve­ment in the equi­ty base asso­cia­ted with an IPO streng­t­hens the company’s abi­li­ty to adapt to chan­ging envi­ron­men­tal con­di­ti­ons. This is necessa­ry becau­se the majo­ri­ty of medi­um-sized com­pa­nies today are faced with the pro­blem that tech­no­lo­gi­cal leaps, shor­ter pro­duct life cycles or necessa­ry stra­te­gic invest­ments requi­re high finan­cial input. At the same time, SMEs can no lon­ger rely on exten­si­ve loan finan­cing from banks, as they used to, espe­cial­ly when their equi­ty capi­tal base is weak. As a result, equi­ty capi­ta­liz­a­ti­on and the abi­li­ty to rai­se equi­ty capi­tal are decisi­ve fac­tors in deter­mi­ning the com­pe­ti­ti­ve oppor­tu­nities of com­pa­nies.

Growth finan­cing is by far the domi­nant argu­ment for an IPO. Nevertheless, an IPO is asso­cia­ted with a num­ber of other posi­ti­ve effects for the deve­lo­p­ment of the com­pa­ny and its owners:

  • Streng­t­he­ning of the equi­ty base
  • Inde­pen­dence of the com­pa­ny from the finan­cial power of the owner
  • Crea­ti­on of com­pa­ny risk-free pri­va­te assets through pla­ce­ment of shares of the for­mer owners
  • Safe­guar­ding the life’s work “enter­pri­se”, if the­re is no suc­ces­sor in the fami­ly
  • Impro­ve­ment of the repu­ta­ti­on and incre­a­se of the level of awa­reness with posi­ti­ve effects for the pro­ducts and ser­vices of the com­pa­ny
  • Incre­a­se in credit­wort­hi­ness and thus the scope for credit finan­cing
  • Grea­ter employ­er attrac­ti­ve­ness
  • The shares can be used as an acqui­si­ti­on cur­ren­cy due to its fun­gi­bi­li­ty and objec­ti­ve value

For more infor­ma­ti­on, plea­se order our free manage­ment rea­der “Suc­cess­ful on the Stock Exchan­ge” at office@blaettchen.de.

 

 

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