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Strategic Choice
Organizations seeking to expand their operations have a wide range of expansion options at their disposal. Choosing the right option in this case can be rather challenging. My organization which plans to expand its operations is faced with this same challenge. Some of the options that have been explored in this case include the issuance of shares to the public through an IPO, merger with another entity, and acquisition of another entity in the same industry.
Issuance of Shares to Members of the Public through an IPO
In basic terms, an initial public offering (IPO) according to Lasher (2010) is the initial sale of securities to members of the public. One of the key benefits of an IPO has got to do with the creation of new capital for an entity (Smart and Megginson, 2008). The authors also note that when it comes to an IPO, a company can later use its publicly traded securities to acquire other companies...
Unlike a merger and an acquisition, an IPO does not necessarily call for the formation of strategic partnerships/relationships with other businesses. An IPO can be a rather expensive undertaking (Smart and Megginson, 2008). Typical costs in this case include but they are not limited to accounting and legal fees as well as underwriter expenses. Although an IPO still remains a valid option it is important to note that the organization might have to contend with takeover threats once it goes public. Lasher (2010) also points out that "the market for initial public offerings (IPOs) is very volatile and risky."
Acquisition of another Company in the Same Industry
An acquisition according to Lasher (2010) can be said to have taken place where "one firm acquires the stock of another called the target." In the…
References
Lasher, W. (2010). Practical Financial Management (6th ed.). Mason, OH: Cengage Learning.
Smart, S. & Megginson, W.L. (2008). Corporate Finance. Bedford Row, London: Cengage Learning.
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