For those go-private transactions involving the management team and/or a majority shareholder, a critical step in the process is determining an offer price that will ultimately be considered fair to the shareholders. If the stock price is depressed and trading is thin, there is a risk that an offer at the trading price will be considered unfair.
Go private transactions take place when the market has lost interest in a story that never played out or when the company never got the market’s interest in the first place. The majority of companies go private for one or more of the following reasons: (1) the stock price is well below the value of the company as a private entity; (2) the costs of being public are stripping all the profits; and / or, (3) the liquidity that was sought by going public has disappeared.
A professional valuation firm can assist the offeror and / or the Board in determining what an appropriate / acceptable offer price might be. An initial valuation calculation can be undertaken that can help get to the go-no-go point in the transaction. An initial calculation can be undertaken at the early stages before too many other costs are incurred and can provide valuable insights into the qualitative and quantitative factors that will be considered by the shareholders.
Evans & Evans has extensive experience in working with companies in go-private transactions. For more information please contact us.