What is “going private”?
Going private is the transaction in which a publicly-traded company is taken off the stock exchange — typically by a buyout from a private equity firm, the management team, the founders, or a strategic acquirer. The purchase is funded by a mix of equity and debt, with the goal of restructuring or operating the company away from public-market scrutiny. The reverse is “going public” (an IPO).
Why companies go private
- Long-term restructuring: public markets demand quarterly performance; private ownership allows multi-year transformation without quarterly noise.
- Operational simplicity: escape SEC filings, earnings calls, analyst coverage, and the cost overhead they create.
- Concentration of decision-making: remove the distributed shareholder base and consolidate around a small number of owners.
- Valuation arbitrage: when the public-market valuation is depressed but private-market buyers see fundamental value, going private captures the spread.
- Take-private leverage: the buyout is funded with significant debt; the new owner intends to deleverage from cash flow over time.
The mechanics
- Tender offer or merger: the acquirer offers shareholders a per-share price (typically 20-40% premium to recent trading price).
- Fairness opinion: independent advisor confirms the price is fair to shareholders.
- Shareholder vote: majority approval required (specific threshold varies by jurisdiction and corporate documents).
- Delisting: after close, the shares are removed from the exchange.
Going private vs. related concepts
- Going private vs. buyout: a buyout is the broader category (private companies can also be bought out); going private specifies the public-to-private transition.
- Going private vs. LBO: a leveraged buyout is the financing structure most commonly used for going-private transactions, but not the only one.
- Going private vs. take-private: the two are synonyms.