Will Take-Private Deals Continue to Climb in 2024?

Lately, a significant number of publicly held companies have seen greener grass on the private equity side of the fence. Considering the rising number of regulatory complications and increasing costs associated with being a public company, the appeal of taking companies private may continue to be too great for some to pass up. Signs from high-profile companies in recent weeks have indicated the trend of will continue to grow.

Upscale retailer Nordstrom announced on April 19 that its board had “authorized the exploration of possible avenues to enhance shareholder value.” The move came after the Nordstrom brothers – company CEO Erik and President Pete – notified the board they were interested in going private. In response, the board said it formed a special committee to judge whether any proposals submitted by the Nordstrom family and other parties would be in shareholders’ best interests.

The Nordstrom family pursued a similar take-private deal six years ago, hoping the move would provide freedom to make changes without the scrutiny that follows a public company. However, the effort was abandoned after failure to agree with private equity firm Leonard Green & Partners on an acceptable price for the company. This latest attempt at a sale by the venerable retail chain coincides with weak department store sales and changes to the industry in general.

Meanwhile, DNA testing company 23&Me is also looking to go private following a rough three-year period that culminated in a negative valuation earlier this month. In a form Schedule D filed on April 17, CEO Anne Wojcicki said she had informed a special committee of the 23&Me board that she intends to begin speaking with “potential partners and financing sources” for a go-private deal.

23&Me’s losses reflect challenges it has faced in changing its business following the steep drop in demand for its DNA tests. After the company’s attempt to increase revenue through a subscription option proved unsuccessful, it turned to prescription drug development using its DNA database. But drug discovery and development are slow moving, and a speedy return on that investment is unlikely. By taking the company private, 23&Me could secure more time and financing to develop its current drug candidates.

Some recent take-private transactions involving the Kaman Corporation and Everbridge Inc. illustrate the allure of such offers to public company shareholders. In proxy statements endorsing the deals, the boards of directors of both companies noted the acquiring private equity firms offered healthy premiums for the shares of the companies relative to their stock prices at the time the proposals were tendered. Furthermore, the boards in each case pointed out the buyers meant business: Both submitted offers in all cash.

One alternative for companies that can’t go private is dual-class shares. In these instances, a small number of insiders at public companies maintain voting control of the company. Take Paramount Global, for instance, where the Redstone family has nearly 80% of the media company’s voting stock despite owning less than 10% of its equity.

If you’re a corporate executive looking for the access to capital of the public markets with the freedom to operate your company as a private one, the dual-class structure sounds like an option for you. Now you just have to convince your shareholders.

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