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Large public companies (e.g. S&P 500) seem to end their lives in one of two ways: either they're acquired (or taken private), or they go bankrupt.

Theoretically it seems like there should be a third option: to wind up the company and return assets to shareholders (as Michael Dell famously suggested Apple should do). A company that realises its industry is in decline and it's about to become unprofitable as a business surely ought to do this; it would give the shareholders at least some cash, rather than the nothing they'll get in bankruptcy. But I can't remember this ever happening, at least in my lifetime (alternately, maybe it's common enough to simply not be news?). A struggling company like HP or Nokia or Blackberry seems to always keep going to a buyout or the bitter end, even when "everyone" can see they're doomed.

Are large public companies ever simply wound up? If not, why?

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  • $\begingroup$ Aren't the fate possibilities for large companies the same as for smaller companies? $\endgroup$ – Mico Jan 3 '15 at 20:26
  • $\begingroup$ Well a priori one would think that, but I've heard of smaller companies closing their doors and winding themselves up, but not large companies. Hence the question. $\endgroup$ – lmm Jan 3 '15 at 22:31
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Assume a company decides to "wind up". What would happen? Its competitors would want to get hold of its tangible and intangible assets (like customer base, patents etc). How is this different from "fighting to a buyout"? In this second scenario, the company has always available the option/threat of continuing competition (possibly harmful to the competitors), while in the "wind-up" scenario it does not -it has committed to leave the business. So "fighting to a buyout" gives the company better position in negotiations, and so chances to increase its selling price compared to the "wind up" scenario.

You could spice this with theories about management, and how "management will not let go" etc, but the above provides an interpretation that appears more widely applicable.

Compared to smaller companies, large companies have more market power and so the "threat" of continuing competition weighs more heavily with competitors.

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  • $\begingroup$ I think this misses the point that Kodak was a shell of its former self by the time of the patent buyout. Imagine how much better off its stakeholders (and the city of Rochester) would be if it had cashed out. $\endgroup$ – shadowtalker Apr 30 '15 at 16:16
  • $\begingroup$ @ssdecontrol My answer provided a "justifying rationalization" as to why businesses "should" "fight towards a buyout" -and your remark about the Kodak case shows that sometimes it can be used as a pretense to hide the "can't let go" mentality. $\endgroup$ – Alecos Papadopoulos Apr 30 '15 at 16:56

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