Senior FTSE execs shun private equity

Top executives in the UK’s biggest listed companies think private ownership means better rewards, less regulation and less public scrutiny – but more than 60 percent are still unwilling to take their companies private at any price.

More than 60 percent of senior executives at FTSE 350 companies have no wish to take their businesses private – despite acknowledging that they would be better rewarded and face less public scrutiny and red tape under private ownership.

According to new research from Close Brothers Corporate Finance, just 39 percent of chief executive officers and chief financial officers at FTSE 350 companies would take their firm private “given the right opportunity and price”. Furthermore, 27 percent said that all other things being equal, they would favour a bid from another quoted company.

This was despite the fact that 90 percent of respondents felt that regulation and red tape in the public markets had got worse in the last few years, while almost two thirds believed that public scrutiny over issues like remuneration had also increased in recent years.

Richard Grainger, chief executive of Close Brothers Corporate Finance, said many senior executives enjoyed the prestige of running big public companies: “There’s undoubtedly a lot of kudos associated with running a public company and senior management are motivated by this recognition.”

The results also suggest private equity still has an image problem among public company executives. 36 percent of respondents thought publicly owned companies were better equipped to take a long-term view, while almost two thirds thought it was easier for public companies to raise funds.

Grainger added: “For private equity groups, lack of public scrutiny means they can adopt longer-term strategies.  For FTSE 350 directors to think otherwise means they’re either in denial or that private equity isn’t clearly spelling out the advantages of private ownership.”

[See Feature: Better the devil you know?]