Definition of 'Going Private'
In an LBO, a group of investors, often led by a private equity firm, acquires a publicly traded company using a significant amount of debt. The debt is typically secured by the company's assets. The investors then take the company private and use the cash flow from the company's operations to pay down the debt.
In an MBO, the management team of a publicly traded company acquires the company from its shareholders. The management team typically borrows money to finance the acquisition, and the company's assets are used as collateral for the loan.
In a reverse merger, a private company merges with a publicly traded shell company. The private company then becomes the surviving entity and the shell company's stock is exchanged for the private company's stock.
There are a number of reasons why a company might go private. Some of the most common reasons include:
* To avoid the costs and regulations associated with being a public company.
* To focus on long-term growth without the pressure of quarterly earnings reports.
* To make it easier to attract and retain top talent.
* To protect the company from hostile takeovers.
Going private can be a complex and expensive process. However, it can also be a way for a company to achieve its strategic goals.
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