Reasons for Firms to Go Public

Accessing Funding and Growth Opportunities

• Companies, including accounting firms, seek admission to the stock market primarily for three reasons: accessing funding for expansion (both organic and through acquisitions), utilizing shares as a tradable currency for mergers, and providing an exit strategy for existing equity partners.

• Going public allows firms to raise capital necessary for investments in technology and systems, such as artificial intelligence or automation tools that enhance operational efficiency.

Market Dynamics and Investor Expectations

• The motivations of private equity investors and institutional stock market investors are similar; both prioritize growth in sales, profits, and share price.

• Historical examples include accounting firms like Tenon, New America, and Ventus that successfully floated but ultimately struggled with integration of acquisitions leading to financial difficulties.

Challenges Faced by Publicly Traded Firms

Legal Firms Entering the Market

• Recent trends show legal firms also entering the public market. Notable examples include Gateley Group and DSW Capital.

Institutional Investors' Role

• To raise significant funds when going public, companies must attract institutional investors such as pension funds or venture capital trusts. This often results in losing some degree of voting control due to co-investors.

Implications of Going Public

• When a firm goes public, it may have to give away a substantial portion of its equity to new investors which can dilute existing shareholders' control while still allowing them to manage business operations.