Public to private transactions are now commonly seen in
management buyouts by private equity firms. Due to the diverse
investor base and regulatory requirements that public companies
are subject to, these transactions are usually carried out
through a takeover offer.
When a bidder sets its sights on a public target and would
like to take it private through a takeover offer, the biggest
risk (presuming that it is a good idea in the first place) is
that this goal is not achieved due to a failing in the deal
structure or a successful competitive bid.
A bidder can use a number of mechanisms to reduce
uncertainty in relation to the acceptance of its offer, for
example, building a stake in the target by acquiring shares,
imposing break fees and a period of exclusivity, seeking a
recommendation from the target's board or offering incentives
to the management team. More topical mechanisms...