Integrative Problems and Virtual Organization Strategy Paper Essay
Huffman Trucking is a business that is privately held that is considering expansion.
The company must choose among three different expansion opportunities. Those options are going public through an IPO, acquiring another organization in the same industry, merging with another organization. It is important that the right expansion option is chosen for Huffman Trucking, but before an option can be chosen the company will have to conduct an investigation of the available options. The investigation will discuss the strengths, weaknesses, opportunities, and threats of each option.During the investigation Huffman Trucking will need to consider the effects of globalization on financial decisions, factors that contribute to exchange rate risks, and mitigating exchange rate risk as it relates to the three options should the company search for a foreign location. Last, the company will choose which option is best for it. Compare and contrast Huffman Trucking Company has three options to choose from: go public through an IPO, acquire another organization within the same industry, or merge with another company.An IPO or initial public offering is the first time a company sells stock to the public.
An IPO happens when a privately owned company issues shares of stock to the public. When this happens a business is no longer privately owned but owned by investors. IPOs are a very important aspect of the United States economy and an easy way for the company to raise cash.
The other two options, acquisition of another company within the same industry or merge with another company differs in the aftermath of the process.In merger negotiations involve ownership interests each company hold in the merged entity. Acquisitions focus on the relative value of each company in negotiating a purchase price. The merged companies operate together whereas an acquisition involves absorbing all or part of another company. Strengths to each approach The process of transitioning to an IPO can be challenging due to the thorough review of all business processes by the Securities and Exchange Commission. The process requires a tremendous amount of input and work from the company’s employees.
Due to the amount of dedication and time it is important to review the strengths and weaknesses of this process to make a determination. Some weaknesses in the transition to an IPO are the large amounts of capital needed for expenses, exposure of all company financial information, and current process changes to satisfy government regulations. Some of the strengths include the opportunity to expand, to increase the number of employees, add to the current products and services, and also take advantage of tax deductions.Opportunities of each approach Huffman Trucking wants to expand, so they are deciding to go public through and IPO.
An IPO is an Initial public offering where shares of stock of an organization are sold to the general public for the first time on a securities exchange. Going public through an IPO allows an organization to grow financially by allowing a private company such as Huffman Trucking transform into a public company to help raise capital by monetizing investments of former secluded companies and become openly traded enterprises.This approach allows the organization to have the opportunity to grow and be financially stable in today’s market by not only increasing their exposures and credibility, but having access to the public capital market as well. Many businesses are faced with decisions that will have a positive and negative effect on the company but in this case Huffman Trucking chose to go public through and IPO because doing so will raise cash and open many doors financially.
For instance with an IPO Huffman Trucking can get better rates when they issue debt, issue more stock, and trade in the open market, which usually means liquidity, which implement things like employee stock right plans, which attracts top talent. Going public through an IPO is the best choice that Huffman Trucking could make because of all the opportunities that doing so allows. Huffman Trucking has been around since 1945 and this decision to go public through an IPO will not just help them grow and at the same time achieve goals and meeting expectation.Benton L. Gary 2005 The Advantages and Disadvantages of Going Public Retrieved from http://ipoplanner. webzel. net/forum/00000003.
html Threats to each approach Huffman Trucking has been around since 1945 and is a privately owned business because of the company sales and acquisitions of their regional carriers they are still privately owned. Since Huffman trucking is a privately held company and have been for sometime selling stock to the public can turn out to be a flop due to the market being cold.Huffman is trying to expand the operation by allowing the public to be included in this business through IPO but there could be a down fall for this option. One of the downfalls would be the company’s current owner will lose a part of their ownership by selling stock of their company. Another option that will be a threat would be Huffman trucking not being able to perform an IPO on their own because they will have to hire an investment bank who would just be the facilitator of the selling of the stock.
Once the investment bank have became the facilitator they must prepare a fully disclosed registration statement to the SEC with a description of the company and their financial statements and number of shares that are owned by anyone in the company. Once that paperwork is done and submitted to SEC all Huffman Trucking can do is wait while Securities and Exchange Commission does their investigation to determine if the IPO can be done. Initial Public Offerings (2012) Investorguide. com. Retrieved from http://www. investorguide. com/igu-article..
. k-basics-initial-public-offerings. html Conclusion Huffman Trucking conducted an investigation of three expansion options, which helped to determine the most appropriate option for the business. The strengths, weaknesses, opportunities, and threats of each option were evaluated. Huffman Trucking considered the effects of globalization on financial decisions, factors that contribute to exchange rate risks, and mitigating exchange rate risk as it relates to the three options should the company search for a foreign location.
Last, the company chose which option was best for it.