The number of U.S. companies seeking to go private dropped by nearly 50% in 2004, falling from almost 100 in 2003 to fewer than 50. It is the first year since 2001 that the number of initial public offerings exceeded the number of companies wanting to go private. However, the value of proposed going private transactions soared due to a few large announcements -- all this according to accounting specialists Grant Thornton LLP, Chicago.
"The decline can be attributed to the rise in equity markets that occurred in 2003," says Ian Cookson, corporate finance director at Grant Thornton. "In 2002 and 2003, public companies were going private at multiples below those paid by private equity players in the private market. In 2004 that situation reversed."
According to Cookson, around 60% of companies looking to go private actually do so. Analysis of data from Thomson Financial shows that, typically, successful going-private transactions over the last four years have been:
- Relatively small, with revenues around $85 million and market cap around $40 million.
- Fairly inexpensive, with an offering price/earnings ratio of 16, a premium of 33% over the prior weeks share price and an enterprise value of 5.6x EBITDA.
- An acquisition by management in coordination with private capital.