The Enigma of Private Ownership: Why Large Companies Choose to Remain Unlisted

Companies with massive revenues, substantial assets, and significant global influence often adopt private ownership structures. This article explores why some of the world's largest corporations remain privately held and the key benefits they seek to maintain through this model. We will also examine the case of Saudi Aramco, a state-owned company with a unique financial model.

Understanding Private Ownership

Privately-held companies are not listed on public stock exchanges. Instead, they are owned by a few individuals or families who typically have significant control over the company. This structure affords these companies distinct advantages, particularly in terms of preserving family control, avoiding the pressures of public markets, and maintaining company culture.

The Dozen Largest Privately-held Companies in the World

Several of the world's largest privately-held companies, including Cargill, Koch Industries, Bechtel, Deloitte (a professional services network), and Mars, have chosen to remain privately held. These companies maintain private ownership to preserve their unique cultures, long-term vision, and control over decision-making processes. Here's a closer look at each:

Cargill

Cargill, a leading agricultural and food processing company, is privately held. The family-owned structure allows it to maintain a focussed approach to its long-term goals, with little interference from external stakeholders. This control enables the company to make decisions that align with its objectives and values, rather than short-term financial considerations.

Koch Industries

Koch Industries, one of the world's largest privately held companies, is owned by the Koch family. The company has a diversified portfolio, ranging from chemicals and energy to metals and mining. By maintaining private ownership, Koch Industries can operate with minimal regulatory oversight, allowing it to pursue long-term strategies without the need to appease a broad investor base.

Bechtel

Bechtel, a global engineering and construction company, stays privately held to maintain its culture of independence and focus on long-term projects. This structure ensures that the company can take on large, complex projects without short-term pressures that could compromise its ability to execute them.

KPMG

KPMG, a leading professional services network, also remains privately held. This structure allows it to maintain its independence and serve a wide range of clients without the constraints that public ownership might impose.

Mars

Mars, a multinational confectionery and pet care company, is privately held by the Mars family. This allows the company to maintain control over its strategic direction and decision-making processes, ensuring that its long-term vision remains intact.

The Case of Saudi Aramco

Besides the privately held businesses listed above, Saudi Aramco stands as a unique example of a large, state-owned company. Unlike most publicly traded oil companies, Saudi Aramco is 100% owned by the Saudi Arabian government. While it has not yet gone public, Saudi Aramco has taken steps to increase transparency, revealing substantial financial data in order to obtain funds for investments.

In March 2019, Saudi Aramco released its financial statements, revealing a net income of $111.1 billion, solidifying its position as the world's most profitable company. This profit surpasses major corporations like Apple ($59.5 billion) and Exxon Mobil ($20.8 billion).

Despite its massive profits, Saudi Aramco has no immediate plans for an IPO due to several reasons. First, the Saudi government does not need the federal funds that could be generated from an IPO. Second, the Saudi royal family wants to maintain control over the company's financial and operational details. Lastly, they do not wish to have to justify or account for the immense revenue they derive from the company.

These examples highlight the benefits that private ownership offers to large companies, including the ability to maintain family control, avoid short-term pressures, and preserve unique cultures and long-term business strategies. While an IPO can provide access to capital, it also brings increased regulation, stakeholder influence, and transparency, which some companies, such as Saudi Aramco, prefer to avoid.