What Is Going Private?

The term going private refers to a transaction or series of transactions that convert a publicly traded company into a private entity. Once a company goes private, its 澳洲幸运5官方开奖结果体彩网:shareholders are no longer able to✃ trade their shares in the open market.

There are several types of going private tra🧔nsactions, including private equity buyouts, management buyouts, and tender offers.

How Going Private Works

A company typically goes pr🐈ivate when its shareholders decide that there are no longer significant benefitsꦬ to being a public company.

One way for this transition to occur is for the company to be 澳洲幸运5官方开奖结果体彩网:acquiredဣ through a private equity buyout. In this transaction, a 澳洲幸运5官方开奖结果体彩网:private equity firm will buy a controlling share in the company, often leveraging significant amounts of debt. In doing so, the pri🦂vate equity firm secures these debts against the assets of the company being acquired. The interest and principal payments on the debt are then paid for using the cashflows fr🎐om the business.

Another common method is the 澳洲幸运5官方开奖结果体彩网:management buyout transaction, in which the company is taken private by its own management team. The structure of a management buyout is similar to that of a private equity buyout, in that both rely on large amounts of debt. However, unlike a private equity buyo💎ut, a management buyout is undertaken by “insiders” who are already intimately familiar with the business.

In some cases, going priv🅠ate transactions will also involve seller financing, in which the owners of the company (in this case, the shareholders of the publicly traded corporation) help the new buyers finance the purchase. In practice, this generally consists of allowing the buyer to delay payment of a portion of the purchase price for some period of time, such as five years.

Another common example of going private transactions is a tender offer. This occurs when a company or individual makes a public offer to buy most or all of a company’s shares. At times, tender offers are made (and accepted) even when the current management team of the target company does not want the company to be sold. In this situation, the tender offer is referred to as a 澳洲幸运5官方开奖结果体彩网:hostile takeover.

Because the 澳洲幸运🧸5官方开奖结果体彩网:entity puttin🌌g forward the tender offer can be a public corporation, tender offers are often financed using a mixture of cash and shares. For example, Company A might make a tender offer ꦑto Company B in which the shareholders of Company B would receive 80% of the offer in cash and 20% in shares of C🌺ompany A.

Real-Wo🎶rld Example of a Going Private Transaction

In December 2015, the private-equity group JAB Holding Company announced its plans to acquire Keurig Green Mountain. Unlike many private-equity buyouts, this was an 澳洲幸运5官方开奖结果体彩网:all-cash offer.

The offer priced the shares at $92, a nearly 80% premium over their market value prior to the announcement. Unsurprisingly, share prices rose dramatically followin😼g the announcement and the company accepted the offer shortly thereafter.

The tranꦅsaction was completed in March of the following year. Accordingly, the company’s shares ceased trading on the stock ꦚmarket and Keurig Green Mountain became a private company.