Monday, June 04, 2007

Going Private?

In the past few months we have seen many publicly held companies in the U. S. going private, often being acquired by leading private equity firms, such as the Blackstone Group, Kohlberg, Kravis, & Roberts, Silver Lake Partners, and the Texas Pacific Group.

Alltel, the wireless service provider, last month agreed to a $27.5 billion buyout by Texas Pacific and a unit of Goldman Sachs. KKR, notorious for taking companies private, invested $700 million in Sun Microsystems. Avaya is rumored to be selling itself to Silver Lake Partners and the Texas Pacific Group for more than $8 billion. Other notable buyouts include Chrysler, Bausch & Lomb, student-loan company Sallie Mae, Harrah’s, and TXU (Texas Utilities). Even Vitria, a small software vendor based in Silicon Valley, went private last year.

The reason most often given for these humongous buyouts is that these companies no longer have to be accountable for stockholders or waste resources on complying with the Sarbanes-Oxley Act. In fact, some companies have even bypassed NYSE and NASDAQ and chosen to get listed on the stock exchanges in Hong Kong, London, or Singapore.

We believe this is a copout. If a company’s leadership and its board are honest and ethical, they have nothing to hide and should open their kimonos for everyone to see. Now, with them going private, who knows what goes on behind the curtains?

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