The Third Boom and Bust Cycle ‘03-’07

With the passage of the Sarbanes-Oxley Act of 2002 (SOX), in part to prevent financially unhealthy and cash poor companies from reaching an IPO as they had in the 1990s, the costs of reporting and governance that are associated with being a public firm grew significantly, helping make a go private transaction appealing to many public companies. Since privately held firms are not heavily regulated by governmental agencies like the Securities and Exchanges Commission or regulations such as SOX (also known as the, “Public company Accounting Reform and Investor Protection Act” and the “Corporate and Auditing Accountability and Responsibility Act”), this freedom can have major advantages. Without these strict regulations, private companies have greater operational flexibility and can focus more on long-term goals rather than quarterly earnings.