Crain’s Cleveland Business Newspaper Publishes “Decision to go Public, Remain Private” Article by Managing Director Ralph Della Ratta

June 20, 2007

Crain’s Cleveland Business Newspaper featured an article written by Western Reserve Partners Managing Director Ralph Della Ratta in its June 18-24, 2007 issue. The article was titled, “Decision to go public, remain private weighty for companies.”

Mr. Della Ratta wrote, “The decision to go public is weighty, and many business owners wonder if it is worth it in light of today’s stringent financial and regulatory environment. Many wonder if they can, or want to, be held up to such scrutiny and publicity.” He continued, “Over the past few years, the appeal of being publicly held has lost most of its luster. At the same time, the attraction of going private has never been stronger.”

Mr. Della Ratta listed several reasons that companies are shying away from going public. First, he commented that companies are subject to loss of control and dilution. “Perhaps of most concern is that a company can potentially be put ‘into play’ by large, activist shareholders – essentially forced into a hostile takeover situation.”

Second, Mr. Della Ratta commented on “regulations that force CEOs and chief financial officers to certify results and become personally liable for violations. Intensive care must be taken in the preparation of all public filings and releases due to the extreme potential liability.”

Third, companies must consider the significant costs of going public, said Mr. Della Ratta. “Sarbanes-Oxley legislation – specifically Section 404 – has created both intensive and expensive disclosure requirements.” He continued, “The costs of launching an initial public offering are considerable, often ranging from $750,000 to $1.5 million. The company will have underwriting fees payable to its investment banks of approximately 7% of the offering amount. Ongoing expenses are also high and include Securities and Exchange Commission filing costs, exchange fees and financial reporting costs. Increased fees also will have to be paid to all auditors, legal counsel and investor relations executives.”

Finally, Mr. Della Ratta noted other considerations, including a strong historical track record of revenue growth and financial stability, future earnings potential and profitability growth, and the level of “insider selling.” “Given all of these criteria, the owners of a private company must weigh the levels of dilution against financial flexibility for growth capital as well as the cost of public equity relative to other forms of financing, including private equity, bank financing and other types of debt.”