Many family-owned corporations, some in existence for many generations, choose to stay privately held because they see no compelling need to go public. Some choose to expand organically and, if they have no need for fresh capital, they would rather keep strangers away from their boardrooms.
But there will come a time when aspirations grow bigger or when business environment becomes too competitive that capital spending requirements have to grow exponentially. Sometimes, opportunities for mergers and acquisitions arise and loans from banks, friends and family are just not enough anymore. That’s when they start considering other options, such as going public to fast-track growth.
Apart from funding their expansion plans, going public also opens up family corporations to the possibility of growing and diversifying their markets, especially if they are not confining themselves exclusively to the domestic market.
Being open to greater public and regulator scrutiny, publicly listed companies are presumed to practice higher standards of corporate governance. As such, larger corporations—especially foreign ones—tend to be more comfortable in dealing with listed companies, even if they are relatively small. Going public raises the bar for the company, allowing it to enter a new phase of development and giving it better access to discerning suppliers, trade partners and clients.
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“It’s not easy for a family-run business to decide to do an initial public offering (IPO). It takes probably years of getting to the mindset that they want to do it. It’s not something you can do overnight,” said BPI Capital chief operating officer Reginaldo Anthony Cariaso.
One needs to have a “professional” mindset to allow other investors to come in as shareholders. Even if they get to retain the majority of the company, as is usually the case in the Philippines, the accountability becomes greater as the company opens its doors to other shareholders.
