Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Will private equity funds gobble up tech and then the rest of corporate America?

Posted by Tom Foremski - January 23, 2007

A short series of posts on the fastest growing trend in Silicon Valley (and the rest of the world): examining the potential consequences of mergers and acquisitions by massive private equity funds.

- IBM and large Silicon Valley companies are obvious acquisition targets as private equity firms readily raise multi-billion dollar funds.

Click here to read . . .

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- Will companies emerge leaner and meaner from private equity acquisitions? Or will they be weakened from higher debt loads? Their temporary owners know much about financial engineering but what about strategic positioning?

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- Small investors are cut out of the lucrative deals pursued by private equity funds because only the very rich are allowed to invest. Yet many small investors will end up on the wrong end of those deals.

They face a likely scenario that their employer will be acquired by private equity funds and that their new owners will ask for salary and other restructuring concessions. It builds on stress between the super rich and those that aren't.

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- Will we witness the failure of Sarbanes-Oxley (SOX) regulations and the populist movement for greater corporate transparency?

The expense, and the management distraction of SOX compliance is a prime reason for taking public companies private. Plus, private companies suffer less from public scrutiny, a distinct competitive advantage. 

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- What is the future for NYSE, NASDAQ and other stock markets?

With the prospect of fewer public companies as private equity firms snap them up and take them private, the stock markets will have to do something. They will have to merge to maintain liquidity, which is exactly what they have been trying to do.

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More on this topic later today and later this week. .. .

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