In recent years an increasing number of small to mid-sized pubic companies have elected to go private for reasons including: (i) eliminating legal, accounting and public relations costs associated with being a public company, (ii) focusing on long term company objectives rather than being dictated by the short term results driven culture fostered by quarter to quarter reporting, (iii) reducing the potential for securities litigation against the company, its directors and officers and well as director and officer liability under SOX, (iv) reducing the disclosure of sensitive business information associated with SEC reporting requirements, and (v) allowing additional corporate governance flexibility.

In going-private transactions, a controlling shareholder typically acquires the shares of minority shareholders in a public company for cash, debt or stock thereby reducing the company’s shareholder base sufficiently to permit the company to elect to terminate its status as a public company. Under SEC rules, a company may elect to go private when it is owned, directly or indirectly, by fewer than 300 persons. Going-private transactions take a variety of forms but typically are (i) accomplished by a merger, tender offer or reverse stock split, (ii) spearheaded by the company’s senior management, and (iii) financed by third party debt and/or equity financers. The form chosen for the transaction in any particular case depends on need for outside financing, the composition of the shareholder base and the likelihood of a competing bid for the company, among other factors.

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