The phrase “going private” refers to the entire set of activities and transactions which allows a company to change from a public entity to a private company. The move to go private usually comes about as a result of the conclusion that shareholders will be able to preserve more of their advantages if they no longer operate as a public company. In some cases, this can be a result of incurring too much debt. The top management of the company may then decide to temporarily go private while restructuring and settling their financial obligations, and then go public again once these have been completed.
In other cases, the company may need to overhaul its operations in order to function better. In the meantime, it may have to desist from openly trading stocks and resume once the changes have been set in place.
When a company goes private, it means that shareholders can no longer engage in transactions with the stocks they hold. In fact, the whole process usually involves a move by management to buy out all of the company’s public shareholders. The move to purchase either all or a significant portion of the company’s stock may also be initiated by a private individual or by another company. In such a situation, the purchasing entity may have to take on quite a big amount of debt as it initiates a leveraged buyout. This is because the purchase of all or most of the stocks may prove to be quite expensive, especially if the company is a big one. This buyout is actually a major investment, because it is usually done with the intention of going public again at a later time and producing more profit than was possible under previous conditions.
