In these times when going public is getting so much harder to do, I am dumbstruck when I hear those companies lucky enough to have gotten public in the last decade complain about the expense of being public and the regulatory cost burden they are bearing due to Sarbanes Oxley. I’m reminded of Andy Dufresne’s line when he became determined to escape from Shawshank Prison.
When I and my partners formed GTA in 2004, we decided to focus on M&A. After years of experience with initial public offerings, as well as M&A at SoundView Technology Group, the handwriting was on the wall. Going public was no longer going to be the liquidity option for founders that it had been over during the previous decades, at least not for technology companies. The credit crisis has only strengthened the conviction behind that decision and perhaps it has produced an even greater imperative for private companies to seriously consider strategic combinations.
So why the reference to Dufresne’s quote? There are probably hundreds of companies that were fortunate enough to go public prior to 2001 that would not have any shot at doing so today. The question is, how they have taken advantage of a status that is now beyond the grasp of so many private companies? In the vast majority of cases the answer is, precious little.
Among others, we have spent more than a decade working in the telecommunications industry sector, which is served by companies such as Avanex and Bookham. If you have looked at those two companies, did you ever marvel at the fact that on multiple occasions they were able to go to market and raise substantial amounts of capital to support severely challenged business activities? Investors in public companies often can see opportunities in ventures such as these that a bank lending officer wouldn’t take thirty minutes to consider; probably two minutes in today’s market. If you lead a company today that managed to achieve public status eight years ago, don’t underestimate the value of that position.
Companies that went public in 2000, only to have the world around them come tumbling down, have the opportunity to explore the universe of private companies and rebuild their future through carefully considered acquisitions. Who cares about the regulatory costs of being public? Build a business through M&A and organic growth that can more easily bear the cost of being public. Reengineer the future for shareholders and employees by pushing the business in a new and more promising direction. There’s a bright future out there for those small public companies that begin to appreciate what they have and start taking advantage of their position. Get busy building a new future and if you don’t know where to turn, our team might have some ideas that will help get you started.
