Life after IPO: Comparison of Bravo Brio Restaurant Group and Excel Trust Inc - Research Paper Example

Life after IPO: Comparison of Bravo Brio Restaurant Group and Excel Trust Inc. Introduction An IPO stands for Initial Public Offering. As the name states, this is when a business organization primarily offers its stocks’ shares to the public. Most business people refer to this status as going public. An IPO refers to the first time when an owner of a business organization gives up part of his or her business stocks’ shares to the stockholders. This is the only way large companies such as Bravo Brio Restaurant Group and Excel Trust Inc use to get enough capital to fund their huge expansion (Certo 14). The present paper is a comparison of the lives of these two companies after IPO. Business models Bravo Brio Restaurant Group business model Bravo Brio Restaurant Group is the leading operator and operator of two successful restaurant brands in Italy, BRIO Tuscan Grille and BRAVO Cucina Italiana and. The group positions its brands as comprehensive cookery destinations that offer quality food, design elements, and ambiance to their customers at fair and reasonable prices (Restaurant Business 45). Each of the two brands ensures that it provides its guests with quality dining value and experience through serving them with affordable food prepared with the use of fresh flavorful authentic and ingredients. The two brands also make use of advanced Italian cuisine preparation methods with combination of attentive service to customers in an attractive and lively environment. Bravo Brio Restaurant Group is currently striving to become the leading and the best restaurant in the entire America. The group is as well focusing on providing their guests with quality and excellent cuisine preparation experience by ensuring execution consistency. The group believes that both the two brands appeal to wide range of customers especially women who accounts for 62% and 65% at Bravo and Brio respectively. While the two brands share some support activities to ensure success of the company, each brand has its own identity thus the reason as to why the two brands are located in widespread markets. The company demonstrates its growth as well as the brands’ viability in a wide range of markets in the United States. This has enabled the company to grow from forty-nine branches in nineteen states in the year 2005 to eight-five branches in twenty-eight states in the year 2010. From the year 2005 to the year 2009, the company’s revenues had a significant rise from $198.8 to $311.7 million. The company adjusted EBITDA rose from $13.4 million up to $34.8 million. This rise represented a CAGR (Compound Annual Growth Rate) of 11.9% and 27.0%, correspondingly. During this time, the company’s adjusted EBITDA gaps have rose from 6.7% to 11.2%. Excel Trust Inc. business model On the other hand, Excel Trust is a retail business that focuses on real estate investments trust that mainly targets power centers and value oriented communities, freestanding trade properties, and grocery secured neighborhood centers. Excel Trust Inc. does its activities publicly under EXL symbol on NYSE. Excel Trust Inc. currently has a management team, whereby each member must have an experience of 30 years and above in real estate industry. A member must have been managed billions of retail related developments and acquisitions. Excel Trust is among the leading real estate developers in the United States. According to the government of United States, Excel Trust ranks among the top ten leading real estate developers companies with exclusion of banks and tourism hotels. The success of Excel Trust Inc. emanates from the rigorous public savings in high-end properties. Other momentous properties in the Excel Trust Inc. include Downtown Dubai and Arabian Ranches. All business scholars in the United States acknowledge that the Excel Trust success emanates from its intense public investment in the country (Welbourne, Theresa and Alice 45). The company operates under workers’ population of a thousand head tally. The top management of Excel Trust Inc. and especially the Human Resource Department ensures that employees have relevant skills and experience, which enables the company to deliver quality services to its customers. The company’s management also ensures that all employees adhere to the company’s set rules and objectives to ensure its success. Unlike Bravo Brio Restaurant Group, Excel Trust is a monopoly business. Like the other monopoly businesses, Excel Trust Inc. operates under a similar philosophy of investment. While the other real estate developers in the country focuses on the densely populated urban and trade areas, Excel Trust Company for the last years has been focusing quietly on the attractive small shopping centers (Barrows, Thomas and Thomas 67). This market strategy has highly contributed to the success of the Excel Trust Inc. as well as enabling the company to stay ahead of its competitors in the real estate developing sector. However, unlike Bravo Brio Restaurant Group, the success of Excel Trust Inc. emanates from some set principles, which the company operates under. Some of the principles under which the company operates include “integrity is the foundation of our business”, “we can never forget who we work with”, and “our people are our most valuable assets”, among many others. The company’s management ensures that the employees operate under teamwork, which contributes much to its success (Booth, James and Lena 58). The Excel Trust company demonstrates its success and growth in the entire United States operating under the above named principles among many others. This has enabled the company to experience a significant growth and increase of its branches. In the year 2005, the Excel Trust Inc. had a total of 15 branches but its life after IPO has marked a significant growth of the company, which is currently operating more that 15 branches in the United States. From the year 2005 to the year 2009, Excel Trust revenues had a major rise from $170.00 to $200.1 million. Excel Trust Inc. adjusted EBITDA increased from $12.3 million up to $20.8 million. This increment represents a significant success of the company. During this time, the Excel Trust Inc. adjusted EBITDA margins increased from 5.6% to 8.2%. Just like Bravo Brio Restaurant Group, Excel Trust Inc. ensures that it delivers quality services to its customer and implements competitive marketing strategy that enables the company to stay ahead of its competitors. Post-IPO performance of the two firms The post-IPO performance of the two firms is highly different from their performance before IPO. To begin with, the revenue of Bravo Brio Restaurant Group has risen constantly since the company went public in the year 2007. Before IPO, the figures of the company were $205M in the year 2006. In the years 2007, 2008, and 2009 its figures were $265M, $301M, and $312M respectively. However, its income has not been consistent in the three years. In the years 2007, 2008, and 2009, the company reported an income of -$.79M, -$61.4M, and -$3.4M in the three years respectively. Bravo Brio Restaurant Group Initial Public Offering of its stock took place in the year 2010. The company raised $140M after offering ten million shares each at $14. The life of the company after IPO has greatly changed and is currently the leading Italian Restaurant in the United States. Bravo Brio is currently representing the fourth U.S.-based company IPO since the year 2010. The life after IPO marks significant change in the Bravo Brio restaurant Group. This is because the company is now able to accrue enough revenues and capital to enable it opens other new branches. IPO has enabled Bravo Brio restaurant group to raise more capital for further investments in the country. The group is currently operating in almost all markets in the United States with a significant population of customers, which enables it to stay ahead of its competitors such as the McDonalds. On contrary, things have not been good for the Excel Trust Inc. company after its Initial Public Offering. Unlike Bravo Brio Restaurant Group, Excel Trust Inc. has suffered a decrease in its revenues. For instance, the real estate developing company raised $210 million after its Initial Public Offering. This represented a decrease of 22 percent than its original revenue before initial public offering. The stock of Excel Trust Inc decreased by five percent following its initial public offering. The property company sold 15 million of its shares at $14 per share. Excel Trust Inc., which had planned to heave more than $270, according to its prospectus, the company expected to have 16 real estate properties after the initial public offering. However, the results after initial public offering are not as fruitful as it is with Bravo Brio Restaurant Group Company. Comparison of post-IPO performance of the two companies Going public is a very costly process that company faces when they go public. Going public means that a company faces extra responsibilities than operating as a private company. While some companies face benefits after going public, others face challenges due to poor per-IPO planning. For instance, Bravo Brio Restaurant Group has experienced a significant growth and development after going public unlike Excel Trust Inc., which has faced decreased in its revenues due to poor pre-IPO planning. While many business experts think that achievement of restaurants comes result of product, service, and concept, the management of Bravo Brio Restaurant Group acknowledges that inadequate financing of the company will result to poor outcomes as well as prohibiting growth and development of the company. On the other hand, Excel Trust company, although it has principles, which the company operates under, the management failed to implement good pre-IPO planning techniques hence the reason why the company has experienced some decrease in revenues and willing to be private again (Pollock, Timothy and Violina 46). The management of the two firms looks at IPO as a way of getting out or capitalizing from previous investments. No matter how the two firms look at IPO, the fact is that IPO is a primary vehicle that raises capital and revenues in both firms. For instance, the revenue of Bravo Brio Restaurant Group has risen constantly since the company went public in the year 2007. This has contributed to a significant growth and development enabling the company to open other new branches thus dominating almost all markets in the United States. In the year 2006, before the Bravo Brio Restaurant Group went public, the figures of the company were $205M. In the years 2007, 2008, and 2009 the figures of this company increased continuously ($265M, $301M, and $312M) respectively. This is clear evidence that the company has highly benefited from going public. The company has been able to raise enough capital and revenue to advance its investments. However, its income has not been consistent in the three years. In the years 2007, 2008, and 2009, the company reported an income of -$.79M, -$61.4M, and -$3.4M in the three years respectively. Bravo Brio Restaurant Group Initial Public Offering of its stock took place in the year 2010. The company got $140M after offering ten million shares each at $14. On the other side, Excel Trust although it has experienced some benefits, the company has as well faced some challenges due to decrease in revenues after going public. Some of its years after going public indicate severe decrease in revenues and stock thus influencing the company to start planning going private again. Unlike Bravo Brio Restaurant Group, Excel Trust Inc. has suffered a decrease in its revenues. For instance, the real estate developing company raised $210 million after its Initial Public Offering (Tong 45). This indicated a decrease of 22 percent than its original revenue before initial public offering. Some of its developers have gone without customers to rent for some years thus making the company incur huge loses than before. The stock of this property company decreased by five percent, following its initial public offering. This property company sold 15 million of its shares at $14 per share. Excel Trust Inc., which had planned to heave more than $270, according to its prospectus, the company expected to have 16 real estate properties after the initial public offering. However, the results of the company after initial public offering are not as fruitful as it is with Bravo Brio Restaurant Group Company. In addition, going public enabled the Bravo Brio Restaurant Group to establish value for the firm’s equity. This has enabled the restaurant group to stand a better position of investing and opening other branches. The company also stands a better position of acquiring another firm or been acquired by another company. The company is currently having a higher market “cap” enabling it to acquire other restaurants using its marketable acquired stock. This market “cap” has also enabled the company to open other restaurants (How to Prepare an Initial Public Offering 46). Going public has enabled the two firms to attract a large population of potential customers. Going public is frequently, an outward sign that indicates an organization’s success. This has enabled these companies to pay off with not only with public investors but also with banking industry. In addition, because initial public offering, the firms have currently increased their net worth (Zattoni and William 89). The firms are now able to borrow funds on more conditions that are favorable as well as in future. One of the reasons that have influenced these firms to go public is to spread business risk among a firm’s shareholders. On contrary, going public has resulted in Excel Trust Inc. losing its independence. This is because, the external forces that the company receives from its customers influences its operation method. Going public has brought a lot of burden to the company’s executive due to poor pre-IPO planning. This trauma has resulted in decrease of revenue unlike Bravo Brio Restaurant Group whereby after going public has experienced a huge growth and development thus increasing its revenues. Unlike Bravo Brio Restaurant Group, Excel Trust Inc. Company has opened just view branches after going public compared to Bravo Brio Restaurant Group (Anderson, TR and Jeffery 67). The performance of Bravo Brio Restaurant Group after going public has marked an increment in the number of potential customers. This is because going public has enabled the company to accumulate enough revenue for it to advance its services especially food quality and ensuring fair and reasonable prices. On the other hand, Excel Trust company is still facing stiff competition from its public competitors thus the number of potential customers instead of increasing is rigid or decreasing. This is influencing the company’s management to think of going back to private (Liu 56). Other factors that are affecting the success of Excel Trust include timing, reputation, profits, and expectations. The life of Bravo Brio Restaurant Company after IPO has greatly changed and is currently the leading Italian Restaurant in the United States. Bravo Brio is currently representing the fourth U.S.-based company IPO since the year 2010. The life after IPO marks significant change in the Bravo Brio restaurant Group. This is because the company is now able to accrue enough revenues and capital to enable it opens other new branches. IPO has enabled Bravo Brio restaurant group to raise more capital for further investments in the country. The group is currently operating in almost all markets in the United States with a significant population of customers, which enables it to stay ahead of its competitors such as the McDonalds (Desroches, Vijay and Ghislain 87). On contrary, Excel Trust Company although it is experiencing some significant changes, the management of the company is experiencing some challenges after going public. Lessons learned and recommendation The above comparison offers vital lessons to those business owners and companies’ managements, which are preparing to go public. The results of the lives of the two companies after IPO indicate that, for a company to go public it is good to practice public first to enable the management understand the advantages and disadvantages of Initial Public Offering (Hoover's Handbook of Private Companies 56). Most of company owners and executives do more than dreaming as well as planning before going public. However, even those company owners or executives who plan before going public underestimates to analyze what it is required for a firm to be successful after going public, for instance, Excel Trust Inc., which has experienced decrease in its revenues after going public. Most firms fails to succeed after going public mainly because their management thinks that going public only means registering the firms’ stock for sell. Although this is an essential task, the company must also carry out necessary preparations for it to sustain in the public spotlight glare. This means that the executive of firms like Bravo Brio Restaurant Group and Excel Trust must understand some vital elements before going public. First, the management must the capabilities that are necessary for a firm to operate as a public company. The most vital areas that are necessary to understand before going public include governance, auditing, reporting, and risk management. Secondly, the management must understand what is needed to be able to develop such competences in terms of expertise, technology, time, and other necessary resource (Brau, Bill and Ninon 68) Third, it is vital to understand the means of developing those capabilities in efficient and effective manner. Lastly, the management of a company must understand the benefits that the company will achieve from operating at the public level as well as the consequences that result from not doing so. The last lesson learned from these two firms is very vital. The consequences that firms face due to poor pre-IPO planning are highly costly, such consequences include restated financial statements, expenses of implementing processes after failure, diminished confidence among stakeholders, and increased risk. Additionally, failure of complying with investor expectations or regulatory standards can as well distract a firm’s management (Foodservice Operators Guide 76). This is highly evidence in the performance of Excel Trust Inc. after IPO. In contrast, as it is evidence in the performance of Bravo Brio Restaurant Group, the fruits of well-planned pre-IPO groundwork include stronger controls, lower costs, and compelling presentation to firm investors, potentially higher IPO valuation, and smoother operations. In conclusion, going public needs a firm to function at high standards with capabilities of public company that drive performance of higher levels. Failure to adhere to these standards can result in severe consequences hence company’s failure to success. Such consequences can result in anticipated cash tax or financial issues, regulatory violations, company’s stock delisting, and ultimate company failure. Work cited Anderson, Seth C, T R. Beard, and Jeffery A. Born. Initial Public Offerings: Findings and Theories. Boston: Kluwer Academic Publishers, 2005. Print. Barrows, Clayton W, Thomas F. Powers, and Thomas F. Powers. 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Corporate Governance and Initial Public Offerings: An International Perspective. Cambridge, UK: Cambridge University Press, 2006. Print. Read More