Coutts Consulting Group, a U.K.-based career management firm, is part of a growing trend among smaller publicly held companies: They're taking themselves private. Underappreciated by a stock market infatuated with technology stocks, these companies see their share price fall so low that management buys up the shares and takes the company off the market.

"It's heaven," says Andrew McRae, Coutts Consulting's chief executive. "It's hugely less stressful not having to meet with institutional investors who would say, 'You've delivered the results, but the share price hasn't gone up." Shielded from the beady-eyed gaze of stock market analysts, investors, and the media, private companies are free to concentrate their efforts on long-term planning and to make decisions for company growth that might strike the stock market as too risky.

On the other hand, taking a company private doesn't entirely relieve its management of short-term pressure. If the company takes on substantial debt in order to buy up the shares, its lenders will be paying close attention to short-term performance. The ensuing scrutiny could dampen long-term strategies just as effectively as the clamoring of institutional investors when the company was publicly traded.

Some companies' private investors may eventually want to realize their profits by taking the company public again. But McRae thinks the market doesn't understand Coutts Consulting's business well enough to properly value it. Analysts showed no faith in the company's revenue and growth predictions, which nonetheless were right on the money. For Coutts, keeping the company private is a best practices approach to designing capital structure.

Sources: Arthur Andersen Global Best Practices® knowledge base and "Why Having a Private Life Can Be Heaven," by Alison Maitland, Financial Times, May 30, 2000.

Copyright © 2000 Arthur Andersen. All rights reserved.

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