At first glance, the stat is perplexing. Two-fifths of FTSE 350 chief executives and finance directors would take their firm private given the right opportunity and price, according to research by Close Brothers.
But offered the right opportunity and the right price, doesn’t logic dictate that management would accept a take-private offer. What are the other three-fifths holding out for? Chocolates and flowers?
Perhaps they are. Asked the question, the chief executives seem not to be responding with their corporate hats on. But instead thinking as individuals, with their own career aspirations, job preservation and opinions on the debateable appeal of working for private equity uppermost in their minds.
“Certain people have striven for one thing only in their [professional] lives,” says Richard Grainger, chief executive of Close Brothers: “To be chief executive of a public company.” Doing the job without the kudos and limelight attached is not necessarily appealing.
But private equity is meant to be great fun, isn’t it? No endless earnings or market updates, no interminable sessions with analysts and the media, no pesky corporate governance questions at every turn. Unsurprisingly, the bulk of those questioned agreed that private firms do not face the same governance issues as public companies and face fewer constraints.
That though is not enough to tip the balance when self-interest comes into play. Facing equal bids for their company, 27 per cent were clear that they would plump for an approach by a public company. Just 10 per cent said they would go for private equity.
The notion that this response may have something to do with perceptions of their own future job security is reinforced by the fact that the reasons given for supporting the public option don’t add up. One such reason, given by 63 per cent, was that an advantage of being public is the ability to raise funds. Except that private equity hardly has difficulty raising funds or securing lending currently, and recent research shows that total net debt for the FTSE 100 is £195bn, against a cumulative ebitda of £204bn - the kind of collective balance sheet that makes companies vulnerable to private equity approaches in the first place.
Another reason was that 36 per cent claim a key advantage of staying public is the ability to apply a long-term view to their business. As Grainger puts it, “I think public companies are in denial if they believe their business strategies remain longer-term than those of their private equity counterparts.”
Perhaps most worrying - 14 per cent of those questioned were adamant that they would never accept an approach of any kind, under any circumstances. Pity their shareholders.
