According a report, about 27 per cent of top executives of Britain's FTSE 350 companies surveyed said they would rather be acquired by another listed company.
LONDON: More than a quarter of British companies would rather be taken over by another listed company rather than being bought out by private equity groups, saying leveraged buyouts came at too high a cost, according a report.
About 27 per cent of top executives of Britain's FTSE 350 companies surveyed said they would rather be acquired by another listed company, while only 10 per cent favoured being bought by a private equity firm, according to the report by investment bank Close Brothers.
"Despite the well publicised successes of private equity, most Plc senior management think these come at a price -- reengineering of the business, over-leverage, you name it," said Richard Grainger, chief executive of Close Brothers Corporate Finance.
Around 36 per cent of the chief executives surveyed did not specify which form of takeover they preferred, and around 14 per cent said they would not accept any offers. However, most of the chief executives surveyed expect the leveraged buyout boom will persist.
Some 95 per cent of executives also said the number of public companies being taken private would continue or increase in the next year, as firms seek to avoid pressures from activist investors and regulatory burdens.
About 39 per cent said they would take their firm private given the right opportunity and price.
Managers prefer other listed companies as buyers because it allows them to continue raising funds directly from the financial markets.
More than 36 per cent believed they could apply a long-term view to their business by being publicly listed.
"This is surprising and I think public companies are in denial if they believe their business strategies remain longer-term than those of their private equity counterparts," Grainger said.
"Activist shareholders and quarterly reporting now mean the tables have turned and companies can apply longer-term business strategies under private equity ownership, without the constraints of the public glare."
Still, the number of credit defaults among highly leveraged companies is expected to increase as interest rates rise, credit rating agencies say.
Private equity firms including TPG and Permira have been snapping up companies. They are also increasingly setting their sights on household names such as pharmacy chain Alliance Boots, which has agreed to be bought by Kohlberg Kravis Roberts & Co.
At the same time, others such as supermarket chain J. Sainsbury and CD seller HMV have been fighting off private equity approaches.
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