By: John S. Morlu II, CPA
“Going private” (also called a take-private) is when a company that trades on a stock exchange (like the NYSE or Nasdaq) stops being publicly traded and becomes privately held again. This usually happens because a buyer (often a private equity firm, a founder group, or another company) buys enough shares to take control, then delists the stock and ends public reporting.
In plain terms: the company leaves the “public market spotlight” and moves behind a “private ownership curtain.”
Why Would a Company Choose to Go Private?
Public companies get benefits (easy access to investors, liquidity, visibility). But they also pay real costs—money costs, time costs, and pressure costs.
1. Public markets can be impatient
Public investors often judge a company every 90 days (quarterly earnings). That can push leadership to chase short-term results instead of fixing deeper problems (like pricing, operations, or a messy product strategy). Going private can give management time and privacy to rebuild without daily headlines.
2. Compliance and disclosure are expensive
Public companies must file regular reports, maintain strict controls, and handle investor relations nonstop. That costs money and leadership attention. In some going-private situations, U.S. rules require specific disclosures (like Schedule 13E-3 when certain “affiliate” transactions happen).
3. The stock may be undervalued (or volatile)
Sometimes leaders believe the market price doesn’t reflect the company’s real long-term value—or the stock swings wildly based on sentiment, not fundamentals. A take-private lets a buyer bet on the “real value” and try to unlock it privately.
4. Restructuring is easier in private
Private owners can push big changes faster:
- selling divisions
- changing leadership
- cutting costs
- rebuilding strategy
- investing heavily in tech or operations
Bain (from the private equity world) notes that some take-privates are built around operational improvement—especially margin improvement—where public markets may not be patient.
What Does “The Deal” Usually Look Like?
There are a few common paths:
A. Private equity buyout (most common)
A PE firm raises money from investors and uses a mix of:
- equity (cash from their fund)
- debt (loans—this is why you hear “leveraged buyout” or LBO)
B. Management buyout (MBO)
The current leadership team helps buy the company (often with financial backers).
C. Strategic buyer (another company)
A bigger company buys the public company and then may delist or merge it away.
D. Founder/insider take-private
Founders or controlling shareholders buy out the remaining public shareholders.
The “Price”: Why Premiums Matter
If you own shares, you usually won’t sell unless you get paid more than the current market price. That extra amount is called a premium.
A major study of going-private transactions (Houlihan Lokey) reported median acquisition premiums around the mid-30% range (with many deals higher), depending on the measurement window and year.
Other research and deal commentary often finds typical M&A premiums around ~30% on average across broad samples (not only take-privates).
Simple takeaway: Going private usually requires paying shareholders a meaningful “sweetener.”
What’s Happening Lately: Is Going-Private Activity Growing?
Private equity’s role in global dealmaking has remained huge. PitchBook reported PE buyers’ share of global M&A value rising to about 42% in 2024 (up from 39.5% in 2023)—a sign that sponsor-led activity stayed strong as markets began to thaw.
PitchBook also highlighted that take-private deal value in North America and Europe surged in parts of 2024—for example, $71.6B in Q2 vs. $16.1B in Q1 (a big jump quarter-to-quarter).
And take-privates have been active outside the U.S. too—Japan has seen a rise in these deals, including big sponsor-led transactions covered by Reuters.
Step-By-Step: How a Company Actually Goes Private
While details vary, many deals follow a pattern:
1. Exploration
- Board discusses options (stay public vs. sell vs. go private)
- Advisors are hired (bankers, lawyers)
2. Offer
- Buyer proposes a price and structure (cash deal, merger, tender offer, etc.)
3. Board process + fairness work
- Special committee may form (especially if insiders are involved)
- “Fairness” analysis helps evaluate whether the price is reasonable
4. Shareholder approval / tender
- Shareholders vote or tender shares (depends on structure)
5. Regulatory filings + disclosure
- In U.S. affiliate take-private situations, Rule 13e-3 and related disclosures can apply.
6. Delisting and exit from public reporting
- Stock stops trading publicly; ownership becomes private.
Pros and Cons (The Honest Version)
Benefits
- Less short-term pressure
- More freedom to restructure
- Potential to improve operations away from noise
- Leadership can think in “years,” not “quarters”
Risks
- High debt can be dangerous
- If the company borrows too much and growth slows, the debt can crush flexibility.
- Employees can feel the squeeze
- Cost cuts may come fast.
- Minority shareholders can get a raw deal (in poorly run processes)
- Especially if insiders influence the transaction.
Red Flags to Watch (If You’re Analyzing a Take-Private)
If you’re an investor, employee, or analyst, pay attention to:
- Is the premium unusually low compared with similar deals?
- Did the board use an independent committee (if insiders are involved)?
- Is the buyer piling on too much debt?
- Are disclosures clear about conflicts and valuation logic?
- Are activists or major shareholders objecting (sometimes a signal the price is too low)?
The Real Reason “Going Private” Exists
Public markets are great at pricing liquid stocks every second—but not always great at funding uncomfortable change. Going private is a tool for situations where leaders and buyers believe: “This business can be worth a lot more—but only if we rebuild it without the daily scoreboard.”
Author: John S. Morlu II, CPA is the CEO and Chief Strategist of JS Morlu, leads a globally recognized public accounting and management consultancy firm. Under his visionary leadership, JS Morlu has become a pioneer in developing cutting-edge technologies across B2B, B2C, P2P, and B2G verticals. The firm’s groundbreaking innovations include AI-powered reconciliation software (ReckSoft.com), Uber for handymen (Fixaars.com) and advanced cloud accounting solutions (FinovatePro.com), setting new industry standards for efficiency, accuracy, and technological excellence.