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Knowledge Centre  –  Category: Expansion & Exit
What's The Better Deal:
On Making Successful
Corporate Choices

In 2005, your private NON-US company grosses $1 million. Your Fairy Godmother will give your company $10 million. You won't have to repay the money. You'll keep 100% equity in your company.

Your alternative is to have our associate take your NON-US company public. They'll raise money for your company and train you in the corporate game of controlling your stock. The process will cost you a small percentage of your company's shares. Your insiders will retain the majority of your company's stock and complete operating control.

In either case, you'll use the money wisely to build your company along the lines he will teach you. In five years, you'll want to sell your company. At the time of your company's sale, your company's profit is $3 million/year.

Which offer should you have taken five years earlier to get the best price for your company?

The Fairy Godmother offer leaves you with 100% ownership of your private company. Your private company should sell for 1.5 times its annual profit. Your golden parachute is worth $4.5 million.

Our associate's programme assumes a public company merger in five years. Your stock should trade over $20/share. Your insider shares will be worth over $100 million.

Which was the better deal?

The moral of this story is: take your operating company public. The money you'll raise from your private equity financing isn't nearly as much as the money you'll earn from the sale of your stock at the time of sale or merger.

If you would like to reproduce this article on your own site, Capital Funds Group is pleased to grant such permission provided (1) all attributions and links are retained and (2) no editing of the article is done in any way, either additions or deletions. We would also request that you inform us of the reproduction along with a link to it.
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Capital Funds Group™, Ltd., is headquartered in Abbotsford, BC, Canada. CFG specializes in analyzing your specific needs and pointing you towards that area of financial support bringing you the greatest business growth at the highest possible savings. There is no charge for this service.
 
 

Last Updated: September 19, 2017.
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