1. The Going-Public Decision 11

IPO alternatives
Type
IPO Alternative
Pro
Cons
Debt
Commercial
No sharing of profits
Dependent on sufficient net
bank/lender
worth, income, or cash flow
Debt
Asset-based
No sharing of
Dependent on sufficient as-
lending
profits
sets or cash flow – has higher
borrowing costs
Other
R&D/Investment
Can result in favorably
partnership
priced financing; could
or joint venture
result in synergy and
industry clout
Dependent on a viable tech- nology or other intangibles; could result in a demanding partner
Debt/
Institutional
Can be simple – few
More sophisticated investors–
Equity
parties involved
may negotiate a lower price
Debt/
Leverage
An exit strategy
Company must have ad-
Equity
ESOPs
or financing device with
equate security for lender (as-
certain tax preferences
sets, income, or cash flow)
Other
Selling the
Can permit a complete
company
and certain exit by
existing shareholders
May result in lower pricing than an IPO, loss of future upside tax considerations
Convertible Venture capital
Can be simpler; added
Debt/Equity
experience and reputa-
tion is brought to the
company; focus is
more on future potential
than on current security
More sophisticated investor– may result in lower pricing for the company, plus there is an expected 5- to 7-year exit
For more information on these alternatives, please contact your local PricewaterhouseCoopers’ technology professional at 1-877-PwC-TICE.
PricewaterhouseCoopers LLP Roadmap for an IPO
11

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