Public vs. Private — Wall Street Sways Fortunes
“There are some pretty healthy ROI numbers out there; our return on equity was like 22.8 percent,” Baksha notes. “If you have a solid return on investment, and cash flow for debt service, borrowing money is no big deal at all—whether you’re public or private. A negative net profit doesn’t mean anything if you have 10 percent or more EBITDA and 25 percent return on equity. At that point, who cares what your net profit is, because you’ve got cash flow and ROI that rivals anybody.”
Grossman feels many firms seeking to bolster their equipment dossier will opt for private equity investors as opposed to the highly regulated public sector. “The private equity market didn’t really exist 10 years ago. Today, that’s as an accessible means of growth as the public markets. A lot of that money is public money; they call it private, but there’s a lot of institutional money there.
“Private equity has the benefit of access to capital, but can also think long-term and strategically,” he adds. “Private equity investors go in realizing it tends to be, on average, between a three- and seven-year return. It’s much different than being public, where you must think in 90-day increments.” PI