If you have been paying attention to the news recently, you have probably heard that Elon Musk is purchasing Twitter. The deal is expected to cost around $44 billion, and Musk has announced that he plans to take the company private. 

 

When an organization goes private, it removes itself from public stock exchanges like the NYSE and becomes the property of a private person or entity. In recent years, Dell Computers, Panera Bread, Burger King, and Hilton Worldwide Holdings have all taken this step. 

 

Why Public Companies Go Private 

 

There are three main reasons why an organization might choose to go private. They are: 

 

Increased Flexibility 

 

Because of their duties to their shareholders, public organizations are often forced to focus on short-term results. Once they go private, they have much more flexibility to focus on long-term goals. 

 

Reduced Compliance Costs 

 

Public companies need to comply with a wide variety of securities and corporate governance rules. Doing so requires a great deal of money and resources. 

 

Private companies need to comply with far fewer compliance rules and regulations. As a result, their administrative and legal expenses tend to be a lot lower than their public counterparts.  

 

Reduced Public Scrutiny 

 

Since public companies must announce quarterly earnings and other major developments, they are subject to a great deal of scrutiny from the media and the general public. Private companies do not generally need to make any such announcements. As a result, they tend to experience significantly less scrutiny.  

 

The Process of Taking a Company Private 

 

Taking a public company private is a long and complex legal process that typically boils down to two basic steps. 

 

First, once a buyout bid has been accepted by a majority of a company’s voting shareholders, it must be deregistered with the Securities and Exchange Commission (SEC) – and removed from all public stock exchanges. 

 

Second, the organization’s shareholders must sell their shares to the buyer for the agreed upon price. Individual shareholders do not have the power to negotiate a different sales price. 

 

Want to Learn More? Contact The Frazer Firm Today 

 

The attorneys at The Frazer Firm have been helping Florida business owners with mergers and acquisitions for years. If you’d like to learn more about public versus private companies, please don’t hesitate to contact us. We’ll be happy to provide you with all the info you need!  

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