Negotiations in Public-to-Private Transitions

Assume that private investors wish to purchase a company consists of 60% equity, 20% preferred shares, and 20% minority shareholders. The company is valued using the guideline public company method and determine that a 30% control premium will apply.

(1) Is it mandatory to buy up 100% of company ownership to be able to be able to take it private?

(2) Are the private investors required to pay the 30% premium to the 20% minority shareholders as well?

(3) Who performs the valuation?

(4) Does the valuation determined through the guideline public company method account for 100% of the value or for the majority stake taken?

(5) Can a minority investor stay invested indefinitely in the public company taken private?


I edited your post; this is how you should reply to multiple questions so that your answers are clear.


To be able to take the company private, new investor buys the majority stake from existing sponsors and announce a tender offer to buy remaining shares before delist the company from stock exchange. Those shareholders who do not sell becomes minority shareholders. So it is not necessary to buy 100 percent shareholding to take the company private.

It depends on the tender offer price which is at least equal to the price of majority stake. Hence other shareholders may get more than 30 percent premium.

New Buyer