Dell Go Private? History, Research Say It Could Be Good For Everyone Involved


In late 2010, Seagate toyed with the possibility of going private a second time after saying it was in discussions with an unnamed party widely believed to be TPG Capital and Silver Lake, the companies who took it private the first time. However, by year end, Seagate said such discussions had ended.

Seagate declined to comment about its experience to CRN.

Another example of a publicly listed IT company going private and then public again is security vendor WatchGuard Technologies, which was acquired by equity firms in 2006.

WatchGuard CEO Joe Wang recently told CRN his company had been struggling as a public company with stagnant technology and sales, but as a private company it could afford to invest in R&D for long-term gains without the need to satisfy the short-term needs of investors.

Those kind of results are supported by independent research.

A 2012 University of California Berkeley study, "Incentives to Innovate and the Decision to Go Public or Private," found that, while public companies are able to exploit existing ideas, private companies are better able to explore new ideas because their options are less transparent to investors.

The study's authors found that, in public companies, there is no tolerance for failure because good news provides incentives for short-term behavior. "Thus, the insider may prefer the conventional project because it has a higher probability of early success," the authors wrote.

Private firms, on the other hand, are more biased than public firms towards innovative projects.

"Our model predicts that firms should start under private ownership to provide incentives for exploration and experimentation. Our model also predicts that firms should go private when they need to undertake risky restructurings. Whenever a firm needs to reinvent itself, it makes sense to do so out of the public eye. Major restructurings involving radical changes in strategy are more properly motivated under private ownership," the authors wrote.

One of the examples cited in the Berkeley study was Seagate, which the authors said lagged behind its competitors in terms of the number of patents it had before it went private. "Seagate's innovative position improved significantly after the buyout," the authors wrote.

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