Baderman Island is a privately held company that wants to expand its operations. Here, the company is given three options for the infusion of capital that will enable it to expand: Going public via an IPO, acquisition, or merger. This paper will compare and contrast each of the options as well as analyze the strengths, weaknesses, opportunities, and threats. With any decision that is made there will be advantages and disadvantages. Likewise, when it comes to an expanding a company, certain attributes will benefit the company, as well as some that will make it difficult for the company. Team B will examine the different ways to expand the company and outline a recommendation going forward. Going Public through an IPO
Here the company can make a public issue to get a large amount of capital that it can use to expand operations. For this purpose, the company can issue shares, debentures and preferred stock. When a company goes to public, it has to be converted into a public limited company because private limited companies are not allowed to go public. Strengths and weaknesses.
There are several things that can be looked at as a weakness that comes with the IPO. For example, the time and expense that comes with completing the IPO. Due to the upfront monies that it takes for things such as attorneys and accountants and the time put into the process, which could be a year or more, makes an IPO difficult to justify. Secondly, SEC rules are extensive making the disclosure difficult because this information has to be available to employees, investors and the public. Decisions are no longer based solely on management, but on the stock price. Therefore, if the stock price falls, the company may face losing market confidence. It can affect credit lines and value of the company. If the stock price falls too quickly, a possible takeover could occur.