10 - Public-to-private transactions

Summary

Introduction

In this chapter, we will look at the specific issues relevant to a public-to-private (also often referred to as a ‘take private’) transaction. A public-to-private transaction involves the acquisition by a private-equity-backed vehicle of a public target company (which we will refer to in this chapter as ‘P2P Target’), and as a result combines the features of a traditional private company management buyout with the structural and regulatory requirements of a public company takeover.

In this chapter, we explore some of the particular features which are inherent in such a structure, and the ways in which the private equity and bank funding documents need to adapt to suit the particular requirements of this type of transaction. Other features common in a public bid (for example, the absence of warranties beyond title and capacity) can create challenges for the typical private equity investor. There can be reduced access for the purposes of due diligence, and the regulatory framework and timetable in which a public offer must be made in the United Kingdom has caused such deals to be an increasingly differentiated part of a private equity offering (in the sense that some houses are better equipped, and experienced, to complete them than others). However, with appropriate consideration, they can afford excellent opportunities to private equity investors looking to acquire good businesses with strong management teams.