When a public company is taken private, it means that the company's shares, previously traded on a public stock exchange, are no longer available for trading by the general public. Instead, the company's ownership is transferred to a group of private investors or a single private entity. This process is often referred to as a privatization or going private.
Here's an overview of what typically happens when a public company is taken private:
1. Acquisition proposal: A group of investors, which can include management, private equity firms, or other entities, makes a proposal to acquire all outstanding shares of the public company. This proposal is presented to the company's board of directors.
2. Negotiation and Due Diligence: If the board of directors deems the acquisition proposal favorable, negotiations begin between the acquiring group and the company's board or a special committee representing shareholders. During this stage, due diligence is conducted to assess the company's financials, operations, and legal matters.
3. Shareholder Approval: Once the terms of the acquisition are agreed upon, the proposed transaction is presented to the company's shareholders for approval. The shareholders vote on whether to accept the offer. Typically, a majority of shareholders must approve the privatization for it to proceed.
4. Financing and Transaction Closure: The acquiring group secures the necessary financing to complete the transaction. This can involve obtaining debt financing, equity contributions from the investors, or a combination of both. Once the financing is in place, the privatization is executed, and the public company becomes privately held.
5. Delisting and Ownership Transfer: After the privatization is finalized, the company's shares are delisted from the public stock exchange, and trading in those shares ceases. The ownership of the company is transferred to the acquiring group, and the company's shares are no longer available for public trading.