Selling Out Instead Of Going Public: The Choice Of A New Generation

from the who-needs-an-IPO? dept

Years ago, I was having dinner with someone who had started two very large companies: one of which he sold for a lot of money and another which went public. I asked which process he enjoyed more and he looked at me as if I asked him if he enjoyed flying coach or preferred his own airplane (perhaps an accurate result from the two). All he said was "I made a lot more money going public." Of course, going public isn't always so easy, and some VCs are beginning to realize that it may not always be the best way to cash out of their investments. So, these days, it's no longer considered a failure (as it might have in the boom years) to simply sell your company to another. In fact, that's looking like an increasingly attractive option for companies who realize that the IPO process can be a painful one -- and that a buyout has the potential to let you cash out faster. Of course, the problem with that thought process is it often leads to more companies that were built to flip, rather than built to grow. If the focus of the company is just to sell out to another, they don't tend to be the greatest companies. A company should be attempting to build the best possible company, and then evaluate what options it has. If it's being built to flip, shortcuts are often taken, and the companies fail to plan for the long term -- which any truly successful company needs to do.