Hi-Tech Firms Connecting With P.E. Funds

Yesterday’s venture capital firms are giving way to private equity funds as high-technology firms, particularly in Silicon Valley, are warming to the idea of going private.

Yesterday’s venture capital firms are giving way to private equity funds as high-technology firms, particularly in Silicon Valley, are warming to the idea of going private. According to BusinessWeek, an increasing number of p.e. firms are making a pitch for tech companies to go private as they view it as an escape from the demands of being public - namely, hitting quarterly numbers, dealing with sagging stock prices and facing scrutiny for what seems like every corporate move they make. In addition, more mature hi-tech companies, many moons removed from the venture-capital infused start-up phase, are seeing some heavy-duty advantages to going public, besides operating out of the public eye: Executives can see their company shares rise an average of 20% through a leveraged buyout premium, and companies can see their bottom line top out in the stratosphere through initial public offerings, such as has been the case of Seagate Technology and Verifone. But, says BusinessWeek, there is another reason why execs are getting turned on by p.e. buyout offers: the opportunity to spend their time working on building the business rather than worrying about earnings - something that’s just fine with private equity firms. “Most of these companies are very good companies, and we’re setting free from the 90-day management process,” John Marren on Texas Pacific Group told BusinessWeek. “How much of a CEO’s day is spent worrying about the latest government investigation, or talking to some hedge fund manager about whether orders are going to be up 0.1% or 1% this month?”