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An IPO can help a family business bring in external managers and transform corporate governance
Going public doesn’t mean a family cuts ties with the business. Far from it. Whereas private equity investors will take a seat in some advisory or supervisory capacity, with an IPO, the free float and the diversity of capital markets investors keep the family with a seat at the table and a steadying hand in the culture of the business.
By separating the principal (owners) from the agent (external management), the family can also bring greater scrutiny to decision-making at the executive level.
The family can maintain control where it matters most to them
The family can do this by designing the shareholder structure, including:
- Legal form options - Some jurisdictions offer a variety of legal forms that separate principal and agent functions or capital participation and voting powers.
- Country of incorporation - Depending on the country of incorporation of the IPO vehicle, different legal forms are available and different corporate governance codices apply.
- Issue different share classes - Many publicly held companies offer different classes of shares with a different set of rights for shareholders. Family businesses can give one class of shares - the class of shares they keep for themselves - greater weight or super voting powers so that they can retain control of the company. This certainly benefits the founders.