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Understanding Take-Private Transactions: Rationales and Examples



A take-private transaction is a type of financial deal that involves the acquisition of a public company by a private entity, such as a private-equity group, a consortium of investors, or a controlling shareholder. In a take-private transaction, the public company's shares are delisted from the stock exchange and are no longer traded publicly.

There are several potential rationales for a take-private transaction:


1) The private acquirer sees an opportunity to buy an undervalued or distressed public company and improve its performance or profitability. By taking the company private, the acquirer can make strategic decisions without the short-term pressures of public shareholders and analysts.


Example: In 2013, Michael Dell and Silver Lake Partners acquired Dell Inc., a leading computer maker, for $24.9 billion, after a prolonged bidding war with activist investor Carl Icahn. The transaction allowed Michael Dell to take the company private and focus on its long-term growth and transformation, away from the scrutiny of public markets.

2) The private acquirer wants to gain access to the public company's assets, cash flows, technology, or customer base. By acquiring the company, the private entity can use these resources to drive growth and generate value.


Example: In 2019, Blackstone Group acquired Merlin Entertainments, a British theme park operator, for $7.5 billion, after Merlin suffered from lower visitor numbers and terrorist attacks in Europe. Blackstone saw an opportunity to leverage Merlin's brand, intellectual property, and global footprint to create new entertainment experiences and expand into new markets.

3) The public company wants to avoid the costs and regulations associated with being a public company, such as disclosure requirements, shareholder activism, and market volatility. By going private, the company can operate with more flexibility and privacy.


Example: In 2017, Panera Bread, a US fast-casual restaurant chain, was acquired by JAB Holdings, a private investment firm, for $7.5 billion. The CEO of Panera Bread cited the benefits of going private, including the ability to make long-term investments, avoid quarterly earnings pressures, and reduce public scrutiny.

4) The public company wants to pursue a long-term strategy or a major restructuring that may not be well received by public shareholders or analysts. By going private, the company can implement these changes without facing the scrutiny and criticism of public markets.


Example: In 2014, Heinz, a global food company, was acquired by 3G Capital and Berkshire Hathaway for $28 billion. The transaction allowed Heinz to pursue a major restructuring plan that included cost-cutting, asset sales, and geographic expansion, without the constraints of public markets.

Take-private transactions can be complex and may involve significant financing, legal, and regulatory considerations. Nonetheless, they have been utilized in a number of high-profile deals in recent years, including those described above.


For private equity firms, management teams, and controlling shareholders seeking to reposition or unlock value in public companies, take-private transactions can be a powerful tool.


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