Public-to-private deals are in fact lengthy and costly and can lead to unpleasantness with shareholders--often via lawsuits. The fact that so many companies have nonetheless been willing to take the plunge speaks volumes about how eager they are to escape the increasing burdens of public-company regulation.
...The Securities and Exchange Commission is promising Sarbox reform, though its recent noises suggest it won't exempt smaller companies from the rules. It might want to consider International Strategy & Investment Group data showing that 191 public companies--worth $146 billion in deal value--have gone private since June 30, 2002, shortly before Sarbox went into effect.
Sarbanes-Oxley is truly poised to change the face and future of American business. US markets, indeed, are already becoming a second-rate destination. Foreign public companies are deregistering with the SEC before Section 404 bites them in the buns. This is what they are saying about the American stock exchanges:
"We don't think it adds value to be there," said Anna Auguston, deputy head of investor relations at Nordic telecom group TeliaSonera AB, which de-listed from Nasdaq in August, in an interview with the Journal.
As the other option, firms are going private in spite of the tremendous costs and risk often associated in doing so. Sarbanes might prove to be the most destructive wave of regulatory madness to ever be inflicted upon commerce in this nation. CFOs are fleeing, CEOs are dropping in record numbers (and moving to private companies), foreign corps are deregistering, public entities are going private, and those on the margin in terms of going public are turning back. The fallout from this could be devastating.
On a slightly different note, private equity firms are poised to step in, as is already evident in the auto industry. According to R.W. Baird, "in 2004, private equity firms acquired 30 aftermarket auto suppliers for a total of approximately $5.4 billion, a 150 percent increase in deal value from 1998, the peak year in the last decade. The average transaction size rose from $165.9 million in 1994 to $447.2 million in 2004, a trend Baird expects to continue as private equity firms look for complimentary add-on acquisitions in coming months and years."
An interesting twist is presented, here, as Detroit suppliers are acquired by private equity firms.
"Private-equity firms are looking for undervalued assets to acquire," Benko says. "The industry, however, often resists private equity. Private-equity operated companies take a dispassionate view of business and tend not to genuflect at the altar of auto companies the way traditional suppliers often do. A very symbiotic -- but dysfunctional -- relationship has developed between suppliers and carmakers."
Ahh, not worshipping at the alter of Detroit's Big Three Two - a crime! I got news for the auto folks in Detroit: people also stopped genuflecting at the alter of velvet Elvis paintings at least 25 years ago. One day the Detroit auto industry power elite will wake up and realize that their ability to part the Red Sea is long gone, and that, no, there never was a velvet painting of Lee Iacocca.