Leveraged Buyouts - Criminal

I was considering the recent surge in Leveraged Buyouts and began to wonder why they occur, especially some of the recent ones where the firm goes private and then public again within a short time period, often after 1 to 2 years.

It is obvious to everyone who reads the business news that the private equity groups taking public companies private are making enormous profits. Based on this factor alone the current shareholders of a company for which an offer is made shouldn't be interested in selling as they are clearly leaving a significant amount of value on the table.

This leads to the question of why is there value left on the table? It would seem that the private equity firm has a different operating model in mind for the firm. Assuming the firm is run to maximize shareholder value (there are other considerations but I am not going there for simplicity and the private equity firms aren't going there either) then the current management team should be doing what the private equity firm wants to do. Given the number of transactions over the past few years it should be obvious to management what the new owners will do and they should do it immediately.

If Management is involved in the leveraged buyout the board of directors should immediately fire the entire team and initiate lawsuits seeking damages as the management team clearly has steps in mind to increase the value of the firm that they aren't initiating until they are the owners. They have stopped working in the shareholders interests.

Lawyers are quick to sue a firm whose stock price drops for that fact alone which costs the firm further reducing its value making the entire process suspect but when the shareholders are clearly being harmed why does no one sue?

Are investors so niave that they really believe a bid slightly over market is such a good deal? Clearly the buyers think it is a bargain or they wouldn't have made the bid.

One last observation, this would not apply to mergers between firms. When two firms merge, especially in the same industry, there are other economies of scale that can't be achieved by either firm independently such as combining back office operations and firing one of the home office staffs.