Berry’s Bug Blaster Essay
Due to the recent success of Berry’s Bug Blasters the owner is seeking to expand operations and has three options in which to fund this expansion.
The first option is to take the company public by offering shares of the company in the form of an initial public offering (IPO). The owner can also seek to purchase the struggling competitor. The final option is to merge the business with another pest control company. The owner of the company must weigh each option because each option has its strengths and weaknesses.The IPO option will allow the company to raise large sums of capital from the general public by offering them part ownership in the company. They accomplish this by selling securities to investors that recognize the potential growth of the company. This will ease some of the restrictions set by financial institutions such as banks that require some type of collateral for the money loan.
IPO will also offer the company greater access to capital for future endeavors.The one major drawback of the IPO option is the fees and regulatory cost associated with it going public. Public Financial Services, LLC states that some of these fees will cost hundreds of thousands of dollars and depending on the complexity can be will over a million dollars (Public Financial Services, LLC, 2011). Although IPOs can raise large sums of capital quickly for any business, it also comes with large amounts of regulations that have to be followed.
Securities fall under federal jurisdiction because most exchanged cross state borders.Securities offered to the public must follow the regulations in the Security Exchange Commissions Act of 1934 (Public Financial Services, LLC, 2011). The advantage of the second and third options are the same whether you buy out a weaker competitor or decide to merge with another company, the need for capital will be less. The reason for this is that you will be getting all the equipment once you acquire the other company, so there will be no need to raise capital for new equipment.Another advantage will be the ability to gain the clients that used that company.
Some of the downsides of these two options are the negative reputation the company may have set for itself. If the company had bad business practices, former clients may see the acquisition as nothing more than a change in the business name and nothing more. Another drawback will be the condition of the equipment that belonged to the company that is being bought.