April 12, 2017
Panera deal and advantages of going private/Crisis management advice
Being Private: A Competitive Advantage?
“Being private is a point of competitive advantage,” declared Panera Chairman and CEO Ron Shaich on CNBC earlier this week.
The statement came on the heels of news Panera was being bought by JAB Holding Company – a privately held family firm that owns a diverse host of brands including Krispy Kreme and upscale Jimmy Choos –for $7.2 billion.
Going private isn’t unusual. Panera adds its name to a long list including Dell and Burger King, to name a few.
The allure of being private may be one reason for the decline in initial public offerings and the overall number of publicly traded firms, according to a recent Fortune article.
“More and more promising companies are opting to stay private longer. After all, why bother with the hassle of shareholders and financial disclosures, when there's enough VC funding to go around?”
Fortune’s research on the issue found that there has been a “precipitous decline in the number of companies that hold an initial public offering” and “a dramatic decline in the overall number of publicly listed companies in the U.S.”
Here are the findings:
- 65% decline in the number of U.S. IPOs from a 2014 high of 363. The flow of initial public offerings slowed considerably in 2016, hitting just 128—the lowest number since the financial crisis—with few signs of picking back up.
- 37% decline in the number of U.S.-listed companies since its 1997 high. With more companies opting for private fundraising over the hassle of public markets, the number of public companies has fallen to 5,734, about on par with the early ’80s.
The reporting requirements and the vulnerabilities that come with the public equity market, is driving some firms to go or stay private, explains Michael Useem, management professor and director of the Center for Leadership and Change Management at the Wharton School, University of Pennsylvania.
“A number of people at public firm say ‘why don’t we exit’, for good reason, but sometimes it’s a not so good reason like avoiding a takeover,” he points out.
Crisis Rules for Private Company Directors
The United Airlines backlash involving a passenger who was forcibly removed from the flight to accomodate a United flight crew has gotten many companies – public and private – thinking about how they’d deal with a public relations crisis of such a grand scale.
Here are 11 crisis rules for private company board directors from Temin and Company.
1. The buck stops with you: Deny denial.
2. Become the guardian of the company’s reputation.
3. Help your company see clearly; don’t let the company’s
first response be naïve or a lie.
4. Proactivity is needed before, during and after a crisis.
- Monitor risks officially at least twice a year.
- Insist upon the company’s having a crisis plan and review it yearly.
- Understand who will lead and be a member of the company crisis team.
- Understand who will be the lead communicator in various situations.
- Understand the role of your private company board in a crisis.
- Determine to be a part of the “after action review” and recovery.
5. In a crisis, increase your input and impact.
6. Understand that immediacy is key, especially with social
media. Make sure the company acts swiftly and does not
retreat into silence.
7. Make sure your board is high-functioning and impactful
before a crisis occurs.
8. Provide a moral center for the company to do the right
thing in a crisis. Limit liability — but not humanity.
9. Work to assure the company becomes a visible and real
part of the solution –— no matter what it takes.
10. Practice board crisis management through sophisticated
role-playing board exercises.
11. Ensure the company does not make the same mistake