What Barbarians Like to Take Private
The article explores the characteristics of companies that private equity firms (referred to as "barbarians") target for take-private deals, examining financial and operational traits that make certain businesses attractive candidates for acquisition and removal from public markets.
Background
- "Barbarians" refers to private equity (PE) firms, a reference from the classic book *Barbarians at the Gate* about the 1988 leveraged buyout of RJR Nabisco.
- When a PE firm takes a company "private," it buys all public shares, delists the stock, and operates the company outside of public market scrutiny.
- The GMO Quarterly Letter is published by GMO, the Boston-based asset manager co-founded by famed investor Jeremy Grantham. GMO is known for its long-term, value-oriented, and often contrarian investment views.
- This piece is the first of a multi-part series examining which types of companies PE firms target for takeovers, arguing that the pattern reveals weaknesses in public market pricing.