Going Private


DEFINITION of 'Going Private'

A transaction or a series of transactions that convert a publicly traded company into a private entity. Once a company goes private, its shareholders are no longer able to trade their stocks in the open market. Private equity firms will typically purchase a struggling company, make it into a private entity, reorganize its capital structure, and issue stocks once a profit can be realized.

BREAKING DOWN 'Going Private'

A company typically goes private when its stakeholders decide that there are no longer significant benefits to be garnered as a public company. Privatization will usually arise either when a company's management wants to buy out the public shareholders and take the company private (a management buyout), or when a company or individual makes a tender offer to buy most or all of the company's stock. Going private transactions generally involve a significant amount of debt.

Companies are often taken private when they need time to restructure their debt or operations prior to becoming a public corporation once again.

  1. Management Buyout - MBO

    A transaction where a company’s management team purchases the ...
  2. Privately Owned

    A company that is not publicly traded on a securities exchange. ...
  3. Private Equity

    Private Equity is equity capital that is not quoted on a public ...
  4. Private Company

    A company whose ownership is private. As a result, it does not ...
  5. Public Company

    A company that has issued securities through an initial public ...
  6. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
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  1. If I reject the tender offer for acquisition of the stock that I own in a company ...

    Since the passing of the Sarbanes-Oxley Act, a significant number of public companies have chosen to go private. The reasons ... Read Full Answer >>
  2. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  3. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  4. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  5. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

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