Public Companies Are Increasingly Going Private

by Grant Thornton, LLP

Recently, it was the mad rush for private companies to go public and offer initial public offerings (IPOs). Now with a lethargic stock market, and new stringent regulations for public companies set forth by the recent Sarbanes-Oxley legislation, the amount of public companies going private since July when Sarbanes-Oxley was passed has increased 26 percent over the similar time period one year earlier.

There are many reasons for a public company to go private and do a "reverse IPO."

"Many of the recent regulatory changes benefit shareholders by making executives and directors more accountable," says Edward Nusbaum, Grant Thornton's chief executive officer. "While this is great from a shareholder's perspective, companies that are publicly traded may now face additional burdens. Most of these regulatory reform provisions are focused squarely on public companies — while their private company counterparts do not share these same requirements.

"These recent regulatory developments have increased the cost of being a public company," Nusbaum says, adding that, "going private could save a company accounting and legal fees associated with Securities and Exchange Commission filings, as well as executive time."

Going private provides additional advantages by eliminating some of the pressures associated with being a public entity, such as reducing the pressure to maintain growth. By going private, a company also regains confidentiality because the company no longer has to disclose compensation and financial details to the public, and control is put solely in the hands of the new owners. Additionally, companies that go from being public to private could possibly save the costs of defending themselves in shareholder litigation.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Oct 22This webinar will include discussions of important issues in AU-C 800, Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.