As part of the process of deciding whether an IPO is the right route for the company, the Board needs to consider what it and the other stakeholders are looking to achieve. The advantages and disadvantages of an IPO need to be considered in conjunction with other potential avenues. The other options available depend on what the Board is trying to achieve.
If the Board is looking to raise capital to fund the expansion of the business, then an IPO is an obvious and common method. However, it may also be possible to raise funds via a bank or similar lending institution, or though the involvement of a Venture Capital Trust (VTC). The former is likely to be based on secured lending, and the latter may will most likely lead to a dilution of the equity held by the founders.
If the intention is for you, as owners of the business, to extract funds from the business, then there are a number of options open to you, including:
- Dividend or bonus – this is quick and simple (provided that distributable reserves are available in the case of a dividend), but will most likely reduce the working capital available to the business. Such distributions are also subject to tax at the prevailing rate (and National Insurance in the case of a bonus);
- IPO;
- Sale of the business – this may be a trade sale, a sale to a financial buyer (such as a VCT), or a management buyout. These processes will take some time, and may require appropriate due diligence to be performed; and
- Equity release – similar to an outright sale, but where only a proportion of the share capital is made available.
Vantis has wide ranging experience of advising clients on their fund-raising options, and of successfully helping them to achieve their fundraising objectives. Our experience means that we can advise you throughout the decision-making process, and in the implementation of the strategy chosen. The services we can offer include corporate finance, tax planning, and financial advice. We can also introduce you to other professional advisers if appropriate.