From the September 2008 issue of Entrepreneur
Despite its reputation as a top-flight steakhouse chain, New York City-based Smith & Wollensky's stock floundered after the company went public following Sept. 11. So last year, company founder Alan Stillman--an industry legend who also created T.G.I. Friday's--sold Smith & Wollensky to a privately held restaurant group.

The owners of New York City's famed Patina Restaurant Group teamed with a private-equity firm to pay Smith & Wollensky shareholders nearly $100 million, a hefty premium on the stock's market value. With proceeds from his own shares, Stillman then bought back the company's New York City restaurants and co-founded a new business, Fourth Wall Restaurants, which he projects will top $50 million in sales this year.

Public-to-private transactions like this have boomed since 2002, when more restrictive federal laws increased the cost of operating as a public company. The value of going-private deals topped $300 billion in both 2006 and 2007, according to data from Thomson Reuters. Familiar names that went private in the past 18 months include Bausch & Lomb, Dollar General and Hilton Hotels. Most recently, in April, publicly traded gum and snack giant The Wrigley Company announced its sale to privately held Mars Inc. for $23 billion.

Smaller companies, in particular, may seek to go private to shed the $1 million-plus in regulatory costs facing public companies annually, says Scott LaRue, co-head of consumer and industrial investment banking at investment firm Piper Jaffray. But that's not to say they will have an easy go at it. Since last fall, going-private deal-making has slowed dramatically, LaRue reports, due to tighter credit markets. "Financing more than $200 million has gotten much more difficult and expensive than it was before [last] summer," says LaRue.

Though there are fewer deals being made this year, the current financial climate still favors entrepreneurs who are seeking to go private while retaining some control of their companies, says LaRue. Why? Because in terms of buyers, corporations are the only ones that are still flush, and corporate buyers are more likely than private-equity buyers to give entrepreneurs a stake or position in the combined company or--as in the case of Smith & Wollensky's deal--to make a side deal to spin off assets to the former owner.

Stillman says he is thrilled by the independence he enjoys heading up his new company, which he co-founded with son Michael Stillman, 28, who serves as president. When Smith & Wollensky was publicly held, says Alan, he spent 25 percent of his time as chairman and CEO with shareholders and stock analysts, while his CFO spent 50 percent of his time working on compliance issues. "It takes your eye off the ball tre-mendously," he says. "Now I'm a restaurateur again."