You can quote us on that: a stock market flotation brings with it a whole raft of new responsibilities for a company's management team, but the technical regulations could turn out to be the least of its worries. Mike Brooks describes the oft-conflicting stakeholder interests that need to be considered before a business goes public.
| Author | Brooks, Mike |
| Position | How To Manage Going Public |
In my two previous FM features--"Critical maths" (June) and "Uneasy money" (July/ August)--I explained ways to solve the funding problems of a growing business and the implications of bringing new shareholders into a firm previously owned by its founders. In tiffs article, the last of the series, I will describe what for many firms is the ultimate step: becoming a publicly quoted company.
In the UK there are two main tiers to the stock market: a full quotation on the London Stock Exchange (LSE) and a quotation on the Alternative Investment Market (AIM). The mechanics of arranging for a company's securities to be traded on either are already well documented the requirements of both markets can be downloaded from the LSE's website (www.londonstockexchange.com)--so I will instead focus on the organisational, management and governance issues often faced by a firm that's considering the move.
The question "why go public?" might seem superfluous at first. Surely it's the ultimate aim of every firm to join the top echelon of business as a plc. But to answer this properly it should be understood that the company itself cannot have objectives. The shareholders will have them, the management team will have them and other stakeholders, such as employees, will also have them. The aims of these different groups may well conflict with regard to the desirability of a flotation. Where they are communicated clearly to the other groups, it will be possible to reach a compromise. More often, however, the issues that concern these various stakeholders may be only partly understood even by the parties themselves.
For existing shareholders these objectives will fall into a number of categories. They may see the flotation as a chance to realise some of their investment. Where such shareholders are venture capitalists, this aim will usually have been made clear to the other investors from the start. The cash-out option may not be uppermost in the minds of trade investors. They may be more interested in increasing the liquidity of their holding to allow for a later realisation when they believe it has achieved its full long-term value.
The attitude of founder shareholders may be a combination of both views. Perhaps they weren't able to realise much of their investment when the first wave of outside shareholders came in, so they may now be keen to sell at least part of their holding. If they have already realised some of the value that they have created, they may be...
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