While many in the press howl at the paydays afforded to company execs and private equity investors, the fact is that in some cases, "going private" makes a lot of business sense. Not having to respond to quarterly expectations can be liberating, as noted below.
The LBO Gang Storms the Valley
Executives insist that what excites them, more than riches, is the chance to focus on such long-term decisions as selling off divisions or cranking up research and development, which may be needed to spark their companies but would spook Wall Street. The private-equity crowd encourages that mindset. "Most of these companies are very good companies, and we're setting them free from the 90-day management process," says John Marren, a partner at private-equity firm Texas Pacific Group. "How much of a CEO's day is spent worrying about the latest government investigation, or talking to some hedge fund manager about whether orders are going to be up 0.1% or 1% this month?"I'm seeing some PE shops look at LBO/MBO opportunities in the life sciences space as well. Public and private companies who are generating sufficient cash to service the debt are beginning to attract the attention of PE shops. You won't see it happen with drug development companies, but certainly with service-oriented companies, like CROs, suppliers of analytical equipment, etc.