MicroCap Take Private for Search?

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June 12, 2022

by a searcher from Cleveland State University in Akron, OH, USA

I think that the Title says it all - Has anybody seen or heard of a searcher doing a MicroCap take private (say EV of roughly $15-50M) ?

Seems like it could be a great strategy?

What would the pitfalls be?


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commentor profile
Reply by a searcher
from Emory University in Atlanta, GA, USA
No but it's very intriguing Kelcey. My initial thought is a turnaround situation: Company went public...hit some rough waters and is now looking for support in the form of capital and/or human resources. That said, the value creation thesis and the team looking to execute something like this has to be solid and compelling. The pitfall will be the significant upfront time and capital costs required to take a firm back into the private domain. However, once private, if you're able to drive the value realization anticipated, it may be well worth the significant upfront costs. The particulars of the deal would guide your decision to move forward with something of this nature. Regardless, I think it's an interesting area to explore.
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Reply by a searcher
from Marquette University in Seattle, WA, USA
I love the idea, but my gut says the Venn diagram of companies that are (1) public, (2) sub $50MM EV, (3) of sufficient quality that you'd want to buy, (4) financeable at decent LBO terms, and (5) not controlled by a family/mgmt team that would block the acquisition is very, very small.

Most of companies of that size that go public do so either because they were unable to raise capital in the private markets (see #3 and #4) or for vanity reasons (see #5).

I would also think the elevated deal costs (and maybe higher risk of closing, depending on shareholder registry?) associated with a take-private would be an automatic no-go for searcher.

Would love to hear from someone who did this though!
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