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Virtual Organization Strategy
Berry’s Bug Blasters is a privately held business and wants to expand its operations. The business is considering three options for moving forward with the expansion plan. The first option is going public with an IPO, or Initial Public Offering. The second option is to acquire another similar business within the industry, and finally the third option is merging with another organization. All three of these options are viable choices and this paper analyzes each option for its viability and suitability to needs of the business. The paper identifies the strengths and weaknesses of the each approach, and well as the opportunities and threats posed by each option. The analysis begins with the strengths of the IPO, merger, and acquisition.
Strengths of an IPO, Merger, or Acquisition
Berry’s Bug Blasters could effectively expand its organization very rapidly through an initial public offering (IPO). An IPO would position the organization, after an underwriting process, to go from a privately owned company with modest annual revenues of $3.2 million to a public company that could put Berry’s on the Bug map. The strength of an IPO for Berry’s Bug Blasters would be in the cash generated by selling shares to the public. This additional capital could help the organization to expand into new territories; more readily compete within its industry, and even become a household name. A listing on a major stock exchange such as the NYSE would boost Berry’s exposure giving the company significant strategic advantage.
Mergers and acquisitions are another means by which Berry’s Bug Blasters could expand its organization. The specific strength or advantage of a merger or an acquisition is to reduce the immediate competition. By combining its assets with another organization, Berry’s could expand into new markets that it may not otherwise have been able to alone, thereby doubling, or tripling the client base. The combined assets, along with diminished competition could strengthen Berry’s strategic position within its industry. Whether growing the company through an IPO’s cash generating processes, a merger or an acquisition’s strategic positioning within the industry, Berry’s Bug Blasters stands to potentially gain new ground and new sales by exposure to new markets and clients.
Weakness of an IPO, Merger, or Acquisition
Berry’s Bug Blasters can gain many benefits from introducing an IPO at the same time these are disadvantages. When a company does an IPO, they also add cost and disclosure to the public. “Public companies are regulated by the Securities Exchange Act of 1934 in regard to periodic financial reporting, which may be difficult for newer public companies. They must also meet other rules and regulations that are monitored by the Securities and Exchange Commission (SEC). More importantly, especially for smaller companies, is the cost of complying with regulatory requirements can be very high. These costs have only increased with the advent of the Sarbanes-Oxley Act.” Investopedia (2011)
Berry’s Bug Blasters would be well served to look for Mergers or Acquisitions to grow the business. The main problem with these ventures is that Bug Blasters must take on added cost of these companies. One must also take the time and effort to change the culture of these companies. At times this can add a great deal of strain on a company. Plus they will have to deal with any public image issues that the merged or acquired company had. Opportunities of an IPO, Merger, or Acquisition
Berry’s must take into consideration not...