Amity Business School MBA Class of 2010, Semester IV Strategic Financial Management Prof Akhil Swami/Anuj Srivastava
PLC and financing Startup Expansion High growth Maturity decline
Generally , this business will have owners equity and some bank debt. It will also be restricted in its funding needs as it attempts to gain customers and get established.
Once firm establishes itself , it looks to expand. Unlikely to generate heavy cash and cash needs are high the owners will look for private equity or VC. They can also convert into public limited and bring IPO.
Firm’s revenues are growing but earnings are lagging behind revenues and internal cash flows lag behind reinvestment needs,
Public traded firms at this stage will like to make FPO, Warrants and other equity options.
If they are using debts , they will go for convertible debts.
Earning and cash flows will continue to increase rapidly, and need for reinvestments will decline. They will use debts or corporate bonds for financing needs.
Revenues and earnings will decline. Existing investments will generate cash but with slower pace. Firm will likely to retire existing debts and buying back stocks. in a sense it will reward the investors and gradually liquidate itself.