Why do it? According to Mike Wright, director of the Centre for Management Buy Out Research: 'You may have difficulty raising capital for growth, or you need to undergo a restructuring that is better achieved away from short-term market scrutiny.' A 'public-to-private' is an expensive business, he says - costing 7%-10% of the firm's value - and P2Ps often fail to meet expectations.
Ask the non-execs. The non-executive directors should give the nod before you approach sources of private finance. They represent shareholders and must appoint their own advisers. Non-execs should indicate what price shareholders might accept.
Have a good story. 'The private-equity investor needs to believe the company is worth more than its market value,' says Christopher Williams, a director of 3i's London buyout team. 'So you need a new business plan, a viable and deliverable one.'
Do the sums. To sell, shareholders will want a premium over the prevailing share price of about 30%, says Williams. Adds Tom Lamb, MD of Barclays Private Equity: 'Sometimes a magic number has to be achieved. For example, if you have had a rights issue a year earlier, investors may want to at least get their money back.' You'll need 90% of shareholders to accept before your offer can go unconditional.
Take soundings. 'Large institutional shareholders are key to the process,' says Williams. 'They must be on board early. We also look at the share register to see if there are any shareholders who won't want to sell, who could hold a blocking stake.' Establish whether other buyers might come forward. Says Lamb: 'The same information has to be offered to all bidders. If the venture capitalists have been all over your books and then a competitor comes forward with an offer, it could be tricky.'
Don't expect a windfall. You may have stock options, but now is not the time to get rich. Management will be expected to commit their own money.
Slim down your team. Non-execs can go. Wave adios to your investor relations manager. CSR is no longer such a vital issue, nor is dealing with the media.
Don't expect a quiet life. 'Instead of seeing your shareholders once a year, you'll see them once a month at board meetings, and they'll have read all the management accounts,' says Lamb. 'The private-equity investor is a more demanding taskmaster.'
Do say: 'Privately owned, we can pursue a restructuring strategy to deliver enhanced growth prospects in the medium term.'
Don't say: 'These overpaid pin-striped City boys understand nothing about how business really works.'