After a brief networking break, the debates continued at the Ritz-Carlton in Battery Park in New York City. The subject: take-privates. The Deal's assistant managing editor, who also happens to be a former lawyer and PE sage, John Morris spoke with Greg Mondre, managing director of Silver Lake Partners, and Dusty Philip of Goldman of Sachs & Co. They're task was to answer the question, "Is the public company dead?" And the answer: Not yet, but public companies have to contend with certain barriers and encumbrances that private companies do not.
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Mondre pointed out that the CEO at a public company spends his time with issues that aren't necessarily related to growing the company, which is the primary focus of a private company CEO. "If you ask a CEO how they spend their time running their firm, they say 20% to 25% of it is spent handling investor relations," Mondre quipped. "PE is a great way for public CEOs to spend time to drive their business." That's probably why there's been a recent rise since Sept. 28 of public companies going private. Morris pointed out that six going-private deals have taken place since Sept. 28. The most recent is Platinum Equity LLC's acquisition of Covad Communications Group for $420 million on Oct. 29.
So what do private companies do better than public ones? The panel pointed out that private companies have a different way of creating value. Mondre and Philip talked about the expertise that buyout firms can bring to companies that public companies do not necessarily have. These experts from PE companies usually see the same problem 40 to 50 times in companies they have brought private. Some PE companies use the scale of their portfolio companies to leverage costs so as to help a firm make operations more efficient and bring value.
But one objective the panelists were firm on was that long-term value was an essential characteristic that their private companies should have. "It's about trying to build a sustainable business over the long term. It’s just as important that investors that buy our company to go to market has [long-term] value, " Mondre said. — Baz Hiralal and Gerald Magpily
