A recent study by Grant Thornton LLP found that the number of U.S. companies seeking to go private decreased by nearly 50 percent in 2004, dropping from almost 100 in 2003 to fewer than 50 last year.
This marks the first year since 2001 that the number of initial public offerings exceeded the number of companies wanting to go private.
Grant Thornton’s study, which included analysis of data from Thomson Financial, reveals the following corporate profile for companies that successfully made the transition from public to private.
* Annual revenue of approximately $85 million, with a market cap of around $40 million
* Fairly inexpensive procedure, with an offering price/earnings ratio of 16, a premium of 33 percent over the prior week’s share price and an enterprise value of 5.6 x EBITDA
* An acquisition by management in coordination with private capital
So what’s next? Grant Thornton’s senor management predicts a wave of merger and acquisition activity to fill the void.
Source: Grant Thornton LLP, www.GrantThornton.com
Correction
In the March edition of Smart Business, Skoda Minotti’s column “Final tips for tax preparation” was mislabeled due to an editing error. It should have read “Partners for Growth.”
