At the beginning of April, American Greetings announced it was going private after being publicly traded since 1958. American Greetings has seen increased competition from both traditional competitors, like Hallmark, and from new competition, like social media.
Here are the top three strategic advantages I see for American Greetings going private.
1) Shed Costs
Going private the company can shed some of the cost of being publicly traded. While they will not have access to capital markets, as a private company, American Greetings may not see this as an advantage they once did.
Will your earnings take a dip due to a new strategy that has a longer pay-off period? According to CFO Magazine, “The most time-consuming part of being a public-company CFO is…managing short-term investor expectations.” With a private company, you don’t have to worry about shareholders panicking. Going private will allow the company to make changes without being restricted by their annual reports and quarterly forecasts.
Why broadcast your strategy to your competitors? As a private company, American Greetings will not have to share their strategy in publicly available annual and quarterly reports. Keeping their strategy a secret from the competition will be advantageous as the company competes in an intensely competitive and diminishing market.
While we normally don’t view it this way, privatization is a type of acquisition. Key shareholders and management will acquire American Greetings to reposition the company strategically.
Let’s face it: the greeting card industry is shrinking. People are moving away from stamping paper cards and putting them in the mail to free eCards. I’ve mentioned before, future demand is king. If you want your company to grow, you need to be proactive and strategic. American Greetings understands their market is shrinking and is proactively changing their strategy.