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In 2020, the pandemic disrupted the Quebec economy and the trend continued in 2021. After a difficult year for local businesses, there is an opportunity for business owners to rethink their business model as they develop their recovery plan. In this context, an initial public offering and equity financing might be a good idea. While the process is relatively costly and time-consuming for senior management, not to mention that it results in a series of obligations for the company and its executives and major shareholders, the benefits far outweigh the disadvantages. Here are five good reasons to take your company public and use equity financing to ensure a successful future. 1. Equity financing: financing your company’s growth differently The moment your company goes public, you significantly expand and diversify your equity financing sources. You are no longer dependent on traditional bank loans. Your company can now raise capital much more easily and at a much lower cost, for example through the issuance of convertible securities, share capital, rights or warrants. In addition, your pool of funders expands considerably, going far beyond founding shareholders, your banker and your very close friends and relatives. All these equity financing tools make it possible to more aggressively manage the growth of your business and take advantage of new business opportunities. 2. Equity financing: facilitating mergers and acquisitions Having a company listed on the stock exchange means having a key advantage when it comes to your expansion plan. Once listed, you can acquire another business using your company’s shares as leverage. This added flexibility increases your chances of success in negotiations. You can thus be more bold in your growth management, as you will no longer be limited to conventional financing methods. 3. Equity financing: gaining notoriety By making the decision to take your business public and opting for equity ?nancing, you will give your business greater visibility. First, the initial public offering will be an opportunity to make your company known to investors through promotional events organized by the brokers participating in the issuance, among others. Second, public companies are often followed by ?nancial analysts, and such attention can be an asset when it comes to marketing products and services. In short, by having your company in the spotlight, it will inevitably gain notoriety, both with investors and economic partners. Finally, for many customers and suppliers, doing business with a publicly traded company is reassuring. They see it as a sign of a well-established business, and this perception can facilitate the conclusion of a sale or supply contract. 4. Equity financing: increasing the market value of your business Better ?nancing costs, greater liquidity for your company’s shares, improved growth potential and increased visibility will all make the market value of your company signi?cantly higher than it was before going public. Once listed, book value will no longer be the main indicator used to determine your company’s worth. It will be worth what investors recognize its value to be, based on its potential for growth and pro?tability and its performance relative to competitors. 5. Company succession made easier When the time comes, it will be much easier for you to retire from your business and bene?t from the fruits of your years-long effort. You will have a number of options, including disposing of your shares through a secondary offering. It will also be easier to attract talented people to take over your business because of the multiple bene?ts that come with the status of public company. The advantages of listing your company on the stock exchange and opting for equity ?nancing are many. In addition to the ?ve points presented here, we could add increased credibility with clients and suppliers, better compensation for key employees, less dilution during fundraising, and others. More companies entering the stock market will rebuild our economy. If you are thinking of transforming your company into a public one, opting for equity ?nancing and taking the plunge into the stock market, do not hesitate to call on one of our lawyers practicing in business law to guide and advise you in the process.
In this three-part article series, we will share with you the intellectual property (IP)–related mistakes that we regularly see with startups. We hope you will find it useful for your business. Happy reading! Part 1 of 3: Mistakes concerning IP in general Mistake #1: Believing that IP issues don’t affect you Some companies don’t put too much thought into intellectual property considerations, either because they feel they don’t have any intellectual property worth protecting, or because they simply don’t want to go through the trouble of obtaining such protection. While refraining from obtaining IP protection might, in rare instances, be a viable business decision, that does not mean that your company should ignore IP considerations altogether. This is because of the existence of third-party intellectual property rights. As an example, if your business sells or uses technology that has already been patented by a competitor, or your business uses a trademark that is confusingly similar to that of a competitor, then said competitor may be able to sue you for infringement, regardless of whether or not said infringement was deliberate. This is why it is always important to consider third-party IP rights, regardless of the nature of your business activities, and regardless of whether you intend on obtaining IP protection. Mistake #2: Believing that IP will cost you too much Many business owners think that intellectual property is too expensive to warrant spending money on when their company is just starting out. However, while obtaining intellectual property rights can sometimes be an expensive process, it is important to remember that investing in your company’s IP rights is just that: an investment, one that can result in the creation of a valuable asset for your company. This can include a trademark registration for a brand that, over the years, will become incredibly popular, or a patent for a highly sought-after piece of technology. In fact, if properly protected, a company’s intellectual property assets can easily become more valuable than any physical asset. And just like any other valuable asset, it will increase your company’s worth and make your business all the more appealing for potential investors. Mistake #3: Hoping for the intervention of the “IP police” Some entrepreneurs believe that once they have obtained an IP right, the government will be the one to enforce it with their competitors. This is unfortunately not the case. It is up to you, as an IP owner, to monitor the market and ensure that your competitors don’t infringe your rights. Should you fail to do so, you’ll be leaving the door wide open to those who would wish to imitate your products and services. In addition, you even risk losing some of your previously acquired rights. For example, your trademark could become non-distinctive—meaning you would no longer be able to protect it—if you were to fail to react and let a third party copy it. Reacting to every single situation isn’t necessarily called for, but each case should be examined in order to determine what consequences third-party use might have on your rights as a holder. Should you discover, in your market monitoring, that a third party is imitating your intellectual property, talk to your IP advisor or lawyer. They can help you decide on an effective first approach to take, either on your own or through them. Said approach might involve asking the third party to cease its activities, claiming compensation for prejudice caused, requiring that certain modifications be made to the use, and/or negotiating a coexistence agreement or a license with or without royalties. Mistake #4: Believing that you won’t be able to “defend your IP” We sometimes hear entrepreneurs say that securing IP rights isn’t worth their while, as they won’t be able to “defend their IP.” They essentially believe that the only purpose of holding IP rights is to sue competitors who imitate their products and services, which they necessarily believe is very expensive. The result is that they fail to protect their innovations and let their competitors appropriate their products and services. Without IP rights, it is true that they have little recourse. In reality, a lawsuit is usually the last option to use against competitors. Many other steps can be taken before resorting to a lawsuit. As is the case for other IP owners, holding IP rights may allow you to: - Significantly discourage competitors from imitating your products and services by clearly indicating that you hold IP rights; and - Negotiate agreements with your competitors who would like to imitate or who are already imitating your products and services. Remember that only a small minority of IP disputes are resolved in court; all other disputes are resolved out of court quickly and at relatively little cost. Mistake #5: Launching your product or service on the market and waiting to see if it will be a success before obtaining IP protection Some entrepreneurs, preoccupied with saving money, launch their new products or services on the market and wait to see if they are successful before protecting them with IP rights. This constitutes a serious mistake, because some IP rights may no longer be available. More specifically, once a product or service is launched, the possibility of protecting it by patent or industrial design is no more. Note that some exceptions apply, particularly in some jurisdictions that allow grace periods. If you are considering protecting one of your products or services by patent or industrial design, you should start the protection process before you launch your innovation on the market. However, said protection process doesn’t need to be completed in order to begin marketing your product or service. Conclusion Lavery’s intellectual property team would be happy to help you with any questions you may have regarding the above or any other IP issues. Why don’t you take a look at our Go Inc. start-up program? It aims to provide you with the legal tools you need as an entrepreneur so you can start your company on the right foot! Click on the following links to read the two previous parts. Part 2 | Part 3
Have you built a prosperous business through your hard work and perseverance? Are you the kind of entrepreneur who invests countless hours in growing your business? Every business owner must one day plan for the succession of his business, whether with a view to his retirement, to sell the business to a third party, or to transfer it to a family member or to the employees. In order to properly prepare for that day, it is crucial to develop a succession plan.