Taking Your Company Public

Raising money via the capital markets offersrewards as well as risks. Here's what to considerbefore making such a move.

After years of playing the lead role of entrepreneur, inventor, marketing guru or titan of technology, it’s time for your curtain call. You’ve molded a start-up into a success or rescued a skeletal outfit from doom. Collecting ample reward for the 20-hour days and bouts of endless fretting, you’ll cash in on the sweat and strain and at the same time secure a debt-free source of the lifeblood corporations crave: capital. You’re taking your company public.

Many CEOs will argue there’s no better way to both receive an ovation and ready a corporation for Act Two of its long-term growth. Money brought in by issuing shares can help you vanquish competitors and conquer new markets. It can be earmarked for everything from new computer networking equipment to acquiring a rival with a strategic marketshare. And judging by the initial public offering (IPO) market of the ’90s, your timing is impeccable. New company shares have been the rare for investors for much of the decade. Last year was no exception, as the number of corporations going public swelled to 870 from 172 in 1990. More importantly, businesses that came to market brought their bosses $49 billion dollars worth of funds.

So with a mint in investor money to be had–most IPOs raise between $5 and $25 million. each–it’s hard not to yearn for the day your company’s shares make the market. All too often, though, the top brass at budding publicly held corporations gets ample schooling only after they’ve jumped headlong into what is an arduous process. “We see a lot of companies pull out half-way through registration,” notes Edsel Guydon, an attorney at the Securities and Exchange Commission (SEC) who says most of the quitters give up because of lack of foresight, preparation or effort. And if that doesn’t temper whatever fantasy is luring you toward an IPO, figure it won’t be cheap. Between legal and accounting fees and other expenses, you can count on a bill amounting to $100,000 at the very least, and possibly a lot more if you’re involving an investment for your deal.

Guy Davis is finding out firsthand just what a weighty decision it is after all. Seven years ago he tapped his retirement savings to buy a small radiation bank as underwriter detection and monitoring concern based in northern Virginia. Shortly afterward, the market ballooned for his investment, Proxtronics Inc., which in short order increased revenues well over 10-fold to $900,000 a year.

Success like that has prompted a horde of outsiders to come knocking on Davis’ door, each with an agenda to pursue. Venture capitalists, for instance, are promising bundles of money Davis could well use to upgrade software and install expensive new scanning technology to get an edge on the competition. “One came here, was impressed and began talking about a deal in short order,” Davis recalls, “The terms sounded good, but he wanted control, almost to the point of making day-to-day decisions.” Davis is convinced that going public will allow him to remain in

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