Survey Taps Opinions of Emerging Growth Companies

Business Wire, August 15, 2002

Business Editors

BOSTON--(BUSINESS WIRE)--Aug. 15, 2002

CEO Vouchers: Yes or No?

Accounting Crisis: Ice Cube or Iceberg?

Regret Going Public?

Market Rebound: When?

A new survey of top executives in emerging growth companies suggests the pain of being a public entity may outweigh the gain. This and a variety of other business and economic findings are captured in the 2002 Leadership Survey: Trends in Emerging Growth conducted by Adams, Harkness & Hill, Inc.

Polled during the investment bank's annual emerging growth conference in Boston, these executives of entrepreneurial companies (annual sales below $100 million) believe the economy in general won't noticeably rebound until the middle of next year. Yet, a substantial number-- 4 in 10 survey respondents --see the Dow finishing this year over 9,000, a moderate advance from its present position.

"It seems like entrepreneurs are seeing the glass as both half empty and half full," said Timothy McMahon, CEO of Adams, Harkness & Hill. "While they're not exuberant, they are still tenacious and expressing confidence in the capital markets."

Being Public: Is It Worth It?

It's no surprise that there are fewer initial public offerings than in the past two years; there is simply less money being generated on Wall Street.

But the recent turmoil over accounting scandals and subsequent regulatory backlash forces a different question: Is being public even worth the effort? A surprising number of entrepreneurial executives in the Adams, Harkness & Hill Leadership Survey said no. Six out of 10 executives surveyed replied that the advantage of being public is at best a toss of a coin and at worst definitely not an advantage at all.

Moreover, 8 of 10 respondents said if their company were private right now, they would not take it public in the current environment.

"While it is obvious that the capital markets are something of a dry riverbed at the moment, what struck us in the survey is the drain these companies feel from managing stakeholders at a time when their core business operations are so demanding," said McMahon. We think this accounts for the significant increase that we and other banks have seen in mergers and acquisitions, as well as other financing alternatives to public equity."

Following are highlights of other findings from the survey:

-- Thumbs up for CEO "Vouchers"

Among the proposals to strengthen investor confidence and to protect shareholders from accounting misconduct is the new CEO "voucher" which personally binds a CEO to the company's financial forecast. This protocol becomes effective for 940 large corporations on August 14, and is being proposed as a federal regulation that could apply in the future to all public companies.

Given the controversial nature of the subject, Adams, Harkness & Hill asked executives of emerging growth companies whether this was a good idea or bad idea. Six in 10 respondents said it was a good idea.

-- Tip of the accounting iceberg?

Enron, Arthur Andersen, WorldCom, Adelphia. High-profile stories about accounting misconduct. A few bad apples? Perhaps not. About half the survey respondents said they believe that accounting misconduct in public companies is "more pervasive than you might think."

As the bolts tighten on accounting practices, the question of "who's responsible" looms large.

-- Where does the buck stop?

About half the respondents said outside auditors are responsible for the financial statements made by public companies.

Seven in 10 respondents said they agree with proposals by the New York Stock Exchange to make corporate boards more accountable for company activities.

About the Survey

The 2002 Adams, Harkness & Hill Leadership Survey: Trends in Emerging Growth represents the opinions expressed by more than 50 company executives from emerging growth companies from across the U.S. attending the 2002 Adams, Harkness & Hill annual emerging growth conference. The majority (79 percent) of the respondents are from companies whose annual revenues are less than $500 million; about half (57 percent) of all respondents represent companies whose annual revenues are $50 million or less. The survey questionnaire and results were supervised for statistical integrity by the Portland Research Group, a professional research and survey company based in Portland, Maine.

About Adams, Harkness & Hill

Adams, Harkness & Hill is a privately held, institutional investment bank focused on emerging growth companies in the technology, healthcare and consumer sectors. With a focus on research-driven investment ideas, Adams, Harkness & Hill offers investment banking, institutional sales and trading, asset management and corporate services. Headquartered in Boston, Massachusetts, and with offices in San Francisco, California, London and Paris, Adams, Harkness & Hill offers the expertise of a national investment bank with the personalized attention and long-term client relationships of a boutique investment bank. European services are offered through Adams, Harkness & Hill, Ltd. More information is available at www.ahh.com. Member NYSE/NASD/SIPC.