CFO.com recently published a short article by Mark Kwilosz, CFA, of Duff & Phelps, LLC in which the author posed the question: "Should Microcap Companies Go Private?"
Mark noted that "A typical microcap company spends $1.0 million to $2.5 million per year to stay public." Mark discussed two major ways that companies can justify the expense of being public. The first, and according to Mark, "most compelling” way to justify the expense is “access to funding to realize growth potential". The second is "to use their stock as an acquisition currency."
In discussing this, Mark accurately points out:
"Microcap companies may also choose to stay public to use their stock as an acquisition currency. Mature companies with low organic growth often seek to grow through acquisitions. Small companies may prefer to issue stock (instead of paying cash) for an acquisition if they lack cash reserves and the capacity to borrow. Sellers in an acquisition more readily accept stock in lieu of cash from a publicly traded buyer than from a private buyer, whose stock could be difficult to value and ultimately monetize."
While both of Mark's points are valid and stand on their own, they can also be combined into one. Microcaps can leverage their access to acquisition funding and use their stock as acquisition currency to do larger (and/or multiple) acquisitions and grow much, much faster than they could as a private companies.
To read Mark's entire post on CFO.com, please click HERE
To learn more about acquisition funding for microcap public companies, please CONTACT ACQUIS
About Acquis Capital:
Acquis Capital is a private investment firm that specializes in funding strategic acquisitions. Acquis Capital's mission is to facilitate strategic acquisitions that increase the book and market value of top tier public companies, with market capitalizations under $300 million.