Taking public company private
What are some reasons you would take a public company private? Also, would a PE firm take a company like LYFT private despite negative profits?
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The most common reason that a PE firm would take a public company private is that they believe the company is undervalued (including the takeover premium) relative to the changes that could be made to it privately. For example, in a private environment they make changes to management, invest behind longer term projects, have a higher level of leverage, have a more "hands-on" approach to governance and don't have any pressure to pay dividends/undertake stock buybacks.
While I don't think PE is that long term focused, 3-5 years, it is longer than quarterly earnings cycle of listed companies.
Also there have no doubt been company failures when PE funds have take some companies private and their turnaround plan didn't work out.
From my point of view, I am not sure if companies like Lyft would make a good take private candidate. For one thing, it may be more difficult to put any/material amount of debt into the business. Would taking the business private address the key issues that Lyft faces? I don't follow the sector but if there is general lack of demand as a result of the pandemic and difficult competitive dynamics vs Uber, then being private may not solve those.
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