Dan Primack has a good interview with the CEO of BankRate.com, a company that was public, went private a few years ago, and returned to the public markets recently.
I’m not going to quote the entire interview here, you should just click the link above and read it yourself, but the part that interested me was about how being private with a PE backer let the company make some acquisitions that it would not have been able to make if it was public.
Fortune: Buyout firms often talk about the advantages of being private. Do they exist?
Evans: There definitely were some advantages to being private… We also saw strategic assets available for sale, and that acquiring them could really change the trajectory and competitive position of our company.
We wouldn’t have been able to make those acquisitions if we’d been a public company, both because the private equity backer provided capital and because one wouldn’t have taken our paper.
I’m more than a bit surprised about this reasoning. Usually companies cite having a public currency with which to make acquisitions as a major reason to IPO… this is totally opposite of what you’d usually consider the norm.
It also leads me to think about what happens when a private company that has shares trading on one of the private secondary markets makes acquisitions with stock. Is the acquired company then able to sell stock right away to third party accredited investors? Or is there the standard lock up language like you’d have when a public company acquires a private company? Or does the fact that the private co can control the sale of share on the secondary market negate the need for such a lock up?