Berry’s Bug Blasters is a privately held organization that has been in business since 2005.
They offer onetime treatments, monthly service plans, and chemicals for customer applications.
They deal with various rodents such as roaches, termites, ants, scorpions, rodents, armadillos,
snakes, bed bugs, silverfish, and bees. They are being faced with three options for expansion.
The three options for expansion are going public through an IPO, acquiring another organization
in the same industry, or merging with another organization.
Going public through IPO
Going public is usually the endgame for companies that are merging. Going public lines up an
Investment bank as an underwriter and joining the company, such as Berry’s Bug Blasters, as a
company with stocks to be traded in a market. The NASDAQ Capital Market is a popular choice
for small companies. This is a long process that starts by hiring a law firm to go through the
process of assembling public disclosures needed in the Initial Public prospectus. This is included
in the Securities Exchange Commission Form S-1. Then the company has to select an investment
bank or banks that will handle the underwriting. The bank the company chooses assumes the risk
of selling the company’s shares for a percentage of the proceeds (www.entrepreneuer.com).
There can be strengths for using the going public through an IPO process. One is if you
maintain being a successful public company, you can possibly see an annual growth of upwards
of 20% and bring in hundreds of millions in revenue yearly. Companies that are public can use
secondary stock offerings as a way to raise money without having to borrow. This makes it
easier to obtain funding and secure loans from different sources. You can also use stock awards
to attract and keep key employees in your company (www.entrepreneur.com).
There are some weaknesses of going public using an IPO. Going public using an IPO is
expensive and takes total commitment form the business owners. This could take up a lot of the
owners time that can cause a slip in anther strategic priorities in the company. Going public can
cost up to several hundreds of thousands to a couple million dollars. Only fewer than 1,000
businesses a year are successful at IPOs (www.entrepreneuer.com).
Acquiring another organization in the same industry
Companies try to make their companies stronger by acquiring other companies. The acquiring
Of a company in the same business has strengths and weaknesses. By acquiring a company
in the same industry can reduce the cost due to economy of scale. It can also result in enhanced
economies of scale for larger entity along with increase in efficiency in production and business
operations. There could be some tax implications that could be good or bad to the merged
companies. If the companies are profitable, you can reduce its tax liability by acquiring a
company that is not (www.smallbusiness.chron.com).
The weaknesses of companies who acquire other businesses is that companies feel they
can raise prices on products due to having less competition. This may not sit well with the
consumer and they might take their business somewhere else. Companies could get set in their
ways when there are no competitors so they do not feel any urgency go out of their way for their
customers. This results in a drop of quality in customer service. There might be a class of culture
when you combine the two companies together. Although the two companies were in the same
industry, the work ethic may be different (www.smallbusiness.chron.com).