Public companies sometimes decide to delist and "go private" for compelling strategic and financial reasons. Take Walgreens, for example—after nearly a century on the New York Stock Exchange, the retail chain recently completed a $10 billion private equity deal. Following years of regulatory challenges and operational hurdles, management determined that delisting offered the best path forward for their "ambitious turnaround plans."
This strategy gives companies the freedom to work with experienced private equity partners while eliminating the constant pressure of Wall Street scrutiny. However, going private isn't a simple exit strategy—it can be nearly as complex as the initial public offering process.
The Securities and Exchange Commission takes a close look at going-private transactions to protect unaffiliated shareholders. Companies pursuing this path, along with their controlling shareholders and affiliates, must navigate detailed SEC requirements, particularly Rule 13e-3.
Here's what you need to know: The SEC permits public companies to deregister their equity securities when they have fewer than 300 shareholders of record (or fewer than 500 if the company lacks significant assets). Once your shareholder count drops below these thresholds, you may no longer need to file periodic SEC reports.
To comply with SEC Rule 13e-3 and Schedule 13E-3, your going-private transaction must include comprehensive disclosures covering:
These rules exist to protect shareholders, and many states have additional takeover statutes providing dissenting shareholders with appraisal rights. Remember, delisting significantly reduces liquidity for investors by creating a limited trading market for your stock.
Transparency and fairness aren't just good business practices—they're legal requirements. SEC scrutiny can result in costly damages and penalties if your company treats minority shareholders unfairly or makes misleading disclosures.
To successfully navigate SEC scrutiny and avoid litigation, structure your going-private transaction with complete transparency, procedural fairness, and appropriate pricing. Management must also carefully evaluate the long-term implications.
Consider these potential challenges:
Going private represents a significant strategic shift that requires careful planning and expert guidance. The process demands thorough understanding of SEC requirements, strategic assessment of your company's unique situation, and meticulous attention to shareholder protection.
Ready to explore your options? Our team specializes in helping companies navigate complex financial transitions. We'll work with you to evaluate whether going private aligns with your strategic goals and assist with SEC financial reporting requirements. Let's structure a deal that's right for your specific situation.
Contact SD Mayer & Associates today to discuss your company's path forward.