While Mr. Musk continues to make headlines and steal the spotlight, Twitter is not the only company to announce plans to go private recently. In fact, the past two years have seen rates of take-private transactions higher than those seen in the prior ten years. While there are many benefits to being a private company, including savings on public company costs, the ability to shield trade secrets, and flexibility to focus on long-term strategies and invest in the business, the shift to a private company also comes with risks.
Aggressive or risky financial assumptions, unclear debt or equity narrative for remaining stakeholders, and inadequate preparation and planning can drive closing delays and increased transaction costs. Board and governance changes place new demands on management, in part due to a smaller, more concentrated set of investors. Furthermore, reliance on debt financing and higher cost of capital require a new focus on managing working capital, mastering the 13-week cash forecast, and maintaining strong FP&A talent to develop accurate and robust financial models and support operational decision-making. De-risking the transaction with the right planning and resources can position the company for growth and make its time as a private company a valuable one.
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