Going Private

What Is Going Private?

Going private — also called a take-private transaction — is a process by which a publicly traded company’s shares are purchased from public shareholders, the company is delisted from the stock exchange, and it ceases to be a public reporting company. The result is a company owned by a small group of investors — typically private equity sponsors, the company’s management, or a controlling shareholder — free from public market reporting obligations, quarterly earnings pressure, and the scrutiny of public investors.

Going-private transactions have been a defining feature of M&A activity since the leveraged buyout wave of the 1980s. They are driven by the belief that certain companies can create more value as private entities — through operational improvements, strategic repositioning, or capital structure optimisation — than they can under the constraints of public ownership.

Why Companies Go Private

Operational Freedom

• Long-term investment — private ownership allows management to pursue multi-year strategies without quarterly earnings pressure
• Restructuring — cost-cutting, divestitures, and organisational changes are easier to execute without public scrutiny
• Risk-taking — management can make bold bets that might depress short-term earnings without triggering shareholder revolt

Financial Advantages

• Leverage — private companies can carry more debt to optimise capital structure
• Reduced compliance costs — eliminating SEC reporting, SOX compliance, and public company governance requirements saves $2-5 million annually for mid-cap companies
• Tax efficiency — interest deductibility on LBO debt creates significant tax shields

Strategic Reasons

• Undervaluation — management or a controlling shareholder believes the market undervalues the company
• Activist pressure — going private eliminates shareholder activism as a distraction
• Competitive sensitivity — private ownership removes the obligation to disclose competitively sensitive information

Transaction Structures

Management Buyout (MBO)

The company’s management team, typically backed by a private equity sponsor, offers to buy the public shares:

• Management contributes rollover equity
• PE sponsor provides equity and arranges debt financing
• Public shareholders receive cash consideration
• Requires approval by a special committee of independent directors due to management’s conflict of interest

Leveraged Buyout (LBO)

A PE firm acquires the company using a combination of equity (30-40%) and debt (60-70%):

• The PE firm conducts due diligence and negotiates with the board
• Acquisition debt is secured against the target’s assets and cash flows
• Post-closing, the company’s capital structure is significantly leveraged

Controlling Shareholder Buyout

A majority shareholder offers to purchase the remaining public float:

• Subject to heightened fiduciary scrutiny under the entire fairness standard
• Typically conditioned on approval by a majority of the minority shareholders
• The MFW framework (from Kahn v. M&F Worldwide) provides business judgment protection if both conditions are met

Regulatory Requirements

Going-private transactions in the US are governed by SEC Rule 13e-3, which requires:

Requirement	Purpose
Schedule 13E-3 filing	Detailed disclosure of the transaction terms, fairness, and conflicts
Fairness opinion	Independent financial advisor’s assessment of price adequacy
Dissemination to shareholders	All material information provided before the vote
State law compliance	Shareholder approval under applicable corporate law

Rule 13e-3 applies specifically to transactions where an affiliate of the company (e.g., management or a controlling shareholder) is involved, reflecting the heightened conflict-of-interest concerns.

Going-Private Activity

According to Bain & Company’s Global Private Equity Report, take-private transactions represented approximately 25-35% of total PE buyout value in 2023-2024, driven by a combination of depressed public market valuations and large PE fund sizes. The largest take-private transactions exceed $30 billion in enterprise value.

APAC Context

Australia — going-private transactions use the scheme of arrangement or takeover bid structure. Schemes of arrangement are preferred for friendly take-privates because they deliver 100% ownership in a single step without the need for a squeeze-out of minority shareholders. ASIC and the Takeovers Panel oversee the process.

Hong Kong — delisting and going-private transactions require compliance with the HKEX listing rules and the Takeovers Code. The listing rules require that at least 75% of disinterested shareholders approve a voluntary delisting, providing significant minority protection.

Japan — the number of going-private transactions in Japan has increased significantly as PE firms target undervalued Japanese companies. The tender offer followed by a squeeze-out (share consolidation) is the standard structure, with the Companies Act providing the legal framework for compulsory acquisition.

“Going private is not an exit from scrutiny — it is a transition to a different form of accountability,” notes Daniel Bae, founder of Amafi. “In APAC, where public market valuations for mid-cap companies often trail private market multiples, the take-private opportunity set remains compelling.”

---

Evaluating take-private opportunities across Asia Pacific? Amafi helps investors and advisors identify undervalued targets and structure leveraged acquisitions. Learn more.