When to go private - Feedback - Letter to the Editor

Chief Executive, The, August-Sept, 2003 by Martin R. Bring

"The Sarbox Ball and Chain" (July 2003) ended with a telling point: that the compliance burden falls disproportionately on small companies. Faced with the extra time and money required to meet the new rules, many smaller companies might now be tempted to go private.

The move can make a lot of sense. It can free up management to focus on the core business. And after going private, a company can distribute profit to its owners without facing an extra level of tax. But for best results, the following conditions should apply:

* Discounted market valuations and low price-to-earnings ratios, common for companies in out-of-favor industry segments.

* Book value far exceeds market capitalization. Companies for which this is the case can be bought at an attractive price.

* Low interest rates. Financing a going-private transaction with debt can be an attractive option these days, as interest rates are at historic lows.

Martin R. Bring Co-Chair, Sarbanes-Oxley Task Force Chair, Corporate Group Anderson Kill & Olick New York