Middle Market Deals and how to buy, sell and raise capital from $5 to $500 million

I assume many of these companies are going private because of the cost associated with compliance. What is the difference in accounting costs before and after Sarbanes-Oxley?

With more companies going private, what is the likelyhood of new equity firms being created? Much like how we have mutual funds now, I believe it is possible to create an equity firm for the small investor. I think they could function much the same way as REITs.

Good Questions!

The costs of audit related expenses have generally increased three to ten times, depending upon a variety of factors (size of company, who was doing the audit before and who was doing the audit after SOX, etc.).

I'm not sure what you mean by "equity" firm. If you are referring to "private equity firms," these are only open to super affluent individuals. In some rare cases, by layering on more fees, less wealthy (but still wealthy) people are able to participate.

If you are referring to ETFs, which are more like REITS, they invest in public companies and have no access to investments in private companies.

If there is another class of firm you are thinking of, please shoot me an e-mail and let me know what you're thinking about. Perhaps you can educate me!

ddt

The one example that I am thinking of is with CNL. They have a REIT where they buy up properties and hold them for 3-7 years and then sell them. The REITs they create are private REITs and are not traded until maturity. I believe the minimum buy-in is around $5000 or so.

This REIT buys private businesses and properties until it has a nice portfolio built that generates a monthly income. For example, after 9/11, they were buying hotels and other like properties when they went out of favor. They have since turned around and sold the properties.

If we can do the same thing with a "private equity firm", we could create a pool of money for investors. Essentially we would create a mutual fund but instead of buying securities, we would be buying private businesses, though the businesses may be large. Say you were able to put together a group with $500 million. The group could then start buying small businesses.

If enough good companies went private, I think small groups of private investors would start to form these groups. These groups could eventually merge to form even larger groups to get to the billion dollar size.

I think a small example can be found on prosper.com. Here, people form groups to lend people money. Imagine this on a larger scale where people are lending money to buy private firms.

If we could use this same concept with a private equity firm, coll