Glossary · Deals

What is a take-private?

A take-private is when an investor buys all of a listed company’s shares and delists it, so the company becomes privately owned.

In practice

Most take-privates are funded with a mix of sponsor equity and acquisition debt, so they are usually leveraged buyouts of listed companies. The buyer typically signs a merger agreement with the board, which often runs a fairness process, and a shareholder vote or tender offer then completes it. Management may roll over shares. Not to be confused with a PIPE, a minority investment in a listed company.

An example

Round numbers, not a real fund

Say a firm offers $50 per share for a listed company trading at $40, a 25% premium. If shareholders accept, the company is delisted and owned privately.

Why it matters

It is how private equity buys public companies, and shareholders usually receive a premium to the share price.

In the news

Related terms

Leveraged buyoutA leveraged buyout, or LBO, buys a company using mostly borrowed money, with the company’s own assets and cash flow backing the debt.
Enterprise valueEnterprise value is the price of a whole business: the value of its equity plus its net debt, typically. It is what a buyer pays for the company, debt included.
Club dealA club deal is an acquisition made jointly by several investment firms, each putting in part of the equity.
Platform companyA platform is the first company a private equity firm buys in a sector, meant to be built up, often through add-on acquisitions.
EBITDAEBITDA is earnings before interest, taxes, depreciation and amortization, a measure of a company’s operating profit. Buyouts are often priced as a multiple of it.

The terms, in the news each morning.

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