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Knoll Furniture Case

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Knoll Furniture case

Knoll Inc. is company widely recognized as the leader in the design and production of office systems and business furniture in the furniture industry. The company was purchased by the Westinghouse Electric Corporation in 1990 but then was sold in 1996 to Warburg Pincus Ventures, a private equity investing company, through a leveraged buyout. Under the lead by John Lynch, president and CEO of Knoll Inc., and since the acquisition, Knoll performed better and better with net profits grew rapidly.
As an acquiring investment firm of Knoll, Warburg Pincus Ventures suggested that Knoll should consider going public through the initial public offering (IPO). But for the president of the company, it is a struggling decision of whether or not Knoll should go public because there are many pros and cons that have to be considered regarding going public.
One of the advantages for Knoll to go public is that an IPO is a good way for Warburg Pincus to write up its investment to the exit valuation, increasing the internal rate of return. Another advantage is that an IPO will bring a large amount of payout to Warburg Pincus’ top management who received stocks at Knoll so that they have strong incentive for Knoll to go public.
The first disadvantage for Knoll to go public is that an IPO does not bring immediate and attractive benefits to Knoll because the company is performing well and does not have strong demand for immediate capital. Also the company has already built a solid reputation throughout the furniture industry so they do not need to improve their image and visibility through going public. Moreover, the process of going public is costly and time consuming while Knoll is still on its way of growing. Thus once going public, the company will have less attention left to the day-to-day business and it might be a huge opportunity cost. Furthermore,…...

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