Going-private transaction

A going-private transaction is when a public company's shares are bought out, typically by a private equity firm, its own management, or a controlling shareholder, and the stock is then delisted from public exchanges. Once the deal closes, the company stops trading publicly and generally ends its regular SEC reporting obligations.

Shareholders in a going-private deal usually receive cash for their shares, often at a premium to where the stock traded before the deal was announced, in exchange for giving up their public equity stake. These deals are frequently financed through a leveraged buyout, where the buyer uses a significant amount of borrowed money secured against the company's own assets and cash flows to fund the purchase.

Companies and their boards pursue going private for a range of reasons, including escaping the pressure of quarterly earnings expectations and public market scrutiny, avoiding the cost and disclosure burden of being a public company, or taking advantage of a stock price the buyer believes undervalues the business relative to its true potential. For shareholders who intended to hold their stock for years, a going-private deal ends that plan, since once it is approved, all remaining public shareholders are cashed out at the offer price, giving up any future upside whether they wanted to sell or not.