Will the going private trend continue?
Just over a week ago, Electronic Arts (NASDAQ:EA), the maker of Madden NFL video games, among others, shocked markets when it announced it was going private. The $55 billion buyout by a consortium of owners is the largest private equity buyout ever.
This week, the private markets claimed another company, Heidrick & Struggles (NASDAQ:HSII), a leading international executive search firm.
The stock price surged some 20% when markets opened on October 6 after H&S said it was being acquired by a consortium that includes Advent International, Corvex Private Equity, and many Heidrick executives.
The all-cash deal is valued at approximately $1.3 billion, as Heidrick & Struggles stockholders will receive $59 per share in cash. That represents a premium of approximately 26% to Heidrick’s 90-day average price per share.
Heidrick stock had been trading at around $48 per share before the deal was announced, now it is up to roughly $58 per share as investors seek to profit from the premium offer price.
This pivotal moment represents an exciting new chapter in Heidrick’s growth story, and a tremendous opportunity for us to join forces with an investment consortium led by two highly regarded and successful partners. Advent and Corvex know Heidrick well and bring a unique set of financial and strategic resources that will allow us to create even more value for clients and colleagues,” said Tom Monahan, CEO of Heidrick & Struggles, who will remain in that role.
A growing trend of going private
Company officials said the move will help advance its global leadership by allowing it to invest more in its people and better retain talent, among other benefits.
The deal is anticipated to close in the first quarter of 2026. At that point, the stock will no longer be traded on the Nasdaq or any exchange.
There has been a trend, particularly in recent years, of companies leaving the public markets. EA was the largest take private deal ever, but this year alone, several major companies have gone private, including Walgreens, Skechers, Dun & Bradstreet, Worldpay, Dayforce, and energy companies Calpine and TXNM.
According to an analysis by Barronʻs, there are about half as many public companies today, roughly 4,000, than there was 30 years ago. It is mainly because companies either don’t want to deal with the regulatory hurdles, or they want to have a longer-term focus, not reacting every three months to shareholder pressures. Others may simply leave because markets donʻt recognize their value
These concerns still apply, but some suggest that lower interest rates could spur the take-private trend, since lower rates reduce financing costs.
An analysis by Bloomberg, via Sherwood News, said there have been about $148 billion in take-private deals this year, not including H&S. That is short of last yearʻs near-record total of $289 billion, but the year is not over yet. The highest total ever was in 2022 when there was $321 billion worth of deals.
H&S stock has actually performed well over the years, up 31% YTD. Over the past five- and 10-year periods, it has posted average annualized returns of 23% and 11%, respectively.
