How does a public company go private? Don’t they have to convince all shareholders to sell back their shares?

Question

How does a public company go private? Don’t they have to convince all shareholders to sell back their shares?

In: 19

Answer 1

Typically in a situations where a company is being taken private, the amount paid to shareholders is a premium of 20-40% over the current market value of their shares, so there’s not a lot of convincing that has to be done for a good portion of shareholders. The acquiring entity usually leverages the buyout and then uses the target company’s cash flow to service the resulting debt.