Berry’s Bug Blasters Week 5 Paper Team B
FIN/370
6/03/14

Berry’s Bug Blasters is a privately held organization that has been in business since 2005.

They offer onetime treatments, monthly service plans, and chemicals for customer applications.

They deal with various rodents such as roaches, termites, ants, scorpions, rodents, armadillos,

snakes, bed bugs, silverfish, and bees. They are being faced with three options for expansion.

The three options for expansion are going public through an IPO, acquiring another organization

in the same industry, or merging with another organization.

Going public through IPO

Going public is usually the endgame for companies that are merging. Going public lines up an

Investment bank as an underwriter and joining the company, such as Berry’s Bug Blasters, as a

company with stocks to be traded in a market. The NASDAQ Capital Market is a popular choice

for small companies. This is a long process that starts by hiring a law firm to go through the

process of assembling public disclosures needed in the Initial Public prospectus. This is included

in the Securities Exchange Commission Form S-1. Then the company has to select an investment

bank or banks that will handle the underwriting. The bank the company chooses assumes the risk

of selling the company’s shares for a percentage of the proceeds (www.entrepreneuer.com).

There can be strengths for using the going public through an IPO process. One is if you

maintain being a successful public company, you can possibly see an annual growth of upwards

of 20% and bring in hundreds of millions in revenue yearly. Companies that are public can use

secondary stock offerings as a way to raise money without having to borrow. This makes it

easier to obtain funding and secure loans from different sources. You can also use stock awards

to attract and keep key employees in your company (www.entrepreneur.com).

There are some weaknesses of going public using an IPO. Going public using an IPO is

expensive and takes total commitment form the business owners. This could take up a lot of the

owners time that can cause a slip in anther strategic priorities in the company. Going public can

cost up to several hundreds of thousands to a couple million dollars. Only fewer than 1,000

businesses a year are successful at IPOs (www.entrepreneuer.com).

Acquiring another organization in the same industry

Companies try to make their companies stronger by acquiring other companies. The acquiring

Of a company in the same business has strengths and weaknesses. By acquiring a company

in the same industry can reduce the cost due to economy of scale. It can also result in enhanced

economies of scale for larger entity along with increase in efficiency in production and business

operations. There could be some tax implications that could be good or bad to the merged

companies. If the companies are profitable, you can reduce its tax liability by acquiring a

company that is not (www.smallbusiness.chron.com).

The weaknesses of companies who acquire other businesses is that companies feel they

can raise prices on products due to having less competition. This may not sit well with the

consumer and they might take their business somewhere else. Companies could get set in their

ways when there are no competitors so they do not feel any urgency go out of their way for their

customers. This results in a drop of quality in customer service. There might be a class of culture

when you combine the two companies together. Although the two companies were in the same

industry, the work ethic may be different (www.smallbusiness.chron.com).

Merging