A going-private transaction converts a public company into a private company, eliminating the public shareholders and consolidating share ownership under one or a few shareholders.

Public companies go-private to:

  • reduce the expenses of being a public company, including financial reporting, regulatory, compliance, investor relations and professional services;
  • increase operational flexibility and focus on running the business with a view to maximizing long-term value;
  • implement an exit strategy for current shareholders or possible ways to achieve a transfer of business, more particularly with controlling shareholders;
  • lessen the likelihood of becoming a target of potentially opportunistic buyers; and
  • provide the target company and its management with access to a sponsor's financial and operational expertise.

A good go-private candidate will typically be strong, a leading player in its given industry, have substantial management depth, have a good client base, and have good cash flow and good margins. An ideal candidate will also be trading below intrinsic value, have a large block of shares held by insiders and be thinly traded.

Volatile stock markets, COVID-19 and the oil price crash, have combined to create an unprecedented opportunity. Many public companies are trading well-below intrinsic value and management or third-party sponsors have the prospect to acquire good businesses that should bounce back when the current crisis pass.

To assist interested parties in navigating a going-private transaction in Canada, Bennett Jones has prepared Key Considerations for Going-Private Transactions in Canada.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.