Public-to-Private Transactions

Public-to-private (PtP) transactions occur when publicly listed firms are acquired by a private entity. In this transaction, the shareholders of the publicly listed firm are bought out at a premium above the pre-announcement stock price. The buying party typically uses a mix of debt and equity to finance the acquisition. The buying party may include incumbent management, an outside management team, and/or institutional investors such as private equity funds. Private equity funds nowadays compete with other bidders in auctions when acquiring publicly listed firms. PtP transactions help to improve incentive alignment between management and shareholders, to eliminate the costs of a public listing, to avoid unwanted takeover attention due to undervaluation, or to take advantage of favorable market conditions in debt and private equity markets. After the PtP...