Definition of Going Private

What does the term "going private" mean? What is meant by the term "going private"?

"Going private" occurs when a publicly traded company decides to become a private company, which means that shares of the company are not for sale to the public, plus the company doesn't have to file public financial statements.

The ultimate goal of many companies is to "go public" so that the company can easily raise money, and also to allow company insiders to sell shares to the public. So why would a company choose to go private?

The most common reason? To restructure with the hopes of eventually going public once again in the future. A private equity firm might take a company "private" by purchasing all of the shares. The private equity firm would take a struggling company "private", work on making structural and operational changes and then eventually take the company public once again in the future, or sell the firm entirely to somebody else.

Management buyouts are also another common occurrence when a company might go private.

If you hear that a company is going "private", it is most likely because the company is struggling and a private equity firm is stepping in to restructure.

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