There has been significant interest in “going private transactions,” which are generally defined to be transactions in which a controlling shareholder, the executive management team, or other person seeks to “take the company private” by acquiring all outstanding public shares. The increased interest in “going private transactions” may be explained by a number of new burdens facing public companies:

 

• Public companies have always experienced higher costs than private companies due to the cost of complying with their obligations under the Securities Exchange Act of 1934.

 

• With increasing disclosure obligations, especially new certification requirements under Sarbanes-Oxley, management of public companies is subject to increased liability and risk.

 

• With the substantial market declines of preceding years, many companies are finding the valuations placed by the stock markets on their companies are lower than ever before.

 

These factors, coupled with historically low financing costs, may provide a controlling shareholder or management with incentive to “buy back” the company at a lower or bargain price.