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Public vs. Private Financing

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List the advantages and disadvantages of Public versus Private Financing.

Explain why companies go to private and leveraged buyouts.

The advantages and disadvantages of going public is an area worthy of consideration. While it seems that the ultimate goal of every small firm is to grow large enough to one day be public, there are some very sound reasons to challenge this objective.

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Public vs. Private Financing is discussed step-by-step in this solution. The response also has the sources used.

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The advantages of public finance are that large amounts of capital can be raised easily. The company will have access to capital markets for future financing needs. Also going public allows the company to sell its shares and use its shares to acquire companies. The lenders offer favorable terms to public companies. When a company raises public finance the management is able to retain control over its decision making authority.
The disadvantages of public finance are that there is a large cost involved in going public. There is a cost incurred in legal fees, accounting fees, and road show for marketing the shares. Listing fees relating to stock exchanges have to be paid. Underwriter's expenses have to pay by the company. Also the company has to go through a difficult registration ...

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