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The Benefits of Being Public Without Being Public

Or, How to take advantage of the private-to-public arbitrage

Are you looking for growth capital, liquidity, or maybe a timed retirement from your private company? If so, the following information may be of interest to you.

Owners and managers of small businesses are usually not well-equipped for the public market, and therefore should not go public until they are ready and well-positioned to do so. Under our model, your company remains private until you and the Company are ready for the public rodeo! Small Business Development Group, Inc. (SBDG) has a business model that helps you and your Company benefit from our public status without burdening you with the cost and risk associated with being a public company.

Our model is simple, but is a little unorthodox for many, and it will not work for everyone. You merge your Company with an SBDG Special Purpose Vehicle (SPV). SBDG will own 80% of that SPV and you will own 20%; but you will own 100% of a specially-designed preferred stock that protects you with an agreed-upon value position. Over an agreed-upon schedule, you can liquidate your position for cash, registered stock and senior debt, or, when ready, take your company public and raise additional capital to fund growth, creating liquidity for all of your stakeholders.

Small Business Development Group, Inc. (SBDG) acquires private companies having enterprise values of $2 to $20 million for its portfolio. SBDG is specifically seeking profitable companies in which their current owners want to maximize the value of their assets and are willing to enter into a structured buyout while remaining with the company and helping SBDG grow. This increases the value proposition for all concerned.

SBDG mitigates risk for both the seller and for SBDG by structuring a “Soft Leverage Buy-Out”. The seller and SBDG agree on a valuation, then they close the transaction based on an exchange of securities tied to a short-term cash-out schedule as a down payment, and completed over a period of 24 to 36 months.

This process protects the seller, who is required to continue running the Company for an agreed period of time. In many cases, this process allows the seller to receive a greater value for his asset (the Company) than would be possible otherwise, and offers definable upside potential as the Company grows. The seller benefits from SBDG’s status as a public company and thereby achieves greater value and liquidity. SBDG already has substantial revenue and financial strength that will continue to grow throughout and because of this transaction, creating additional value for both parties.

Why the elaborate strategy? Simply stated, it is easier for SBDG to finance something it already owns, based on the enhanced value it gains by being part of a public company. SBDG has a team of professionals who are dedicated to the success of the transaction to insure performance of all stakeholders. The seller takes no more risk than they currently have as operators of a private business; furthermore, you remain in complete control while receiving your payout.

In many respects, you the seller are getting the best of both worlds. You will receive a premium on value and have a number of sound exit strategies, both short and long term. During the term of the transaction, SBDG will use its public status to raise additional capital to grow the firm, thereby creating added value.

What is in it for SBDG? We get to consolidate your financials with ours, creating greater share-value and liquidity. And as we invest in your company, we gain added value in the form of a Return on Investment (ROI) from the value above your premium. And when the company is either sold or goes public, SBDG will benefit from that transaction.

If you are intrigued by this strategy, and if you think this might help you make the financially-beneficial transition you seek, then we should talk. I’d like the opportunity to discuss this program further with you and your client.

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