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What happens when a private company acquires a public company?

2 points by geektips 13y ago

Hi Hackers , I like to know What happens when a private company acquires a public company ?

hkarthik 13y ago
I can share some anecdotes from a family member who worked as a Senior Design Engineer at a semiconductor company which went from being a public company to being purchased by a private equity group. * His stock all converted to straight cash. This resulted in a pretty large tax bill as some of it was subject to capital gains tax since he'd only acquired it a few months before the acquisition. He probably should have planned for this better. * The company went into serious cost cutting mode. Much of the R&D was moved offshore into Design Centers in Israel and India. This put US-based engineers like himself into a fairly miserable position and he left soon after. I suspect most of this was done to improve the balance sheet and make it attractive for another public company to buy it, which still hasn't happened.
apagade 13y ago
A couple of things can happen and it primarily depends on why the private company was buying the public company. 1) Reverse Takeover mentioned by Raysor above. In this case the private company is taking over the public company with the aim of taking itself public. The goal here is to streamline the process of going public by just including all the assets of the private company with those of the already listed company. In this case, the stock continues to trade (possibly at a premium depending on the terms of the merger) but the underlying business has changed possibly dramatically. Several airlines have gone public through reverse takeovers. For some reason, I also know that Frederick's of Hollywood went public this way (they have excellent annual reports). 2) The public company might be taken private. In this case, a stockholder of the public company is given cash for his stock. He actually doesn't have to sell (unlike comments from previous posters) but there is not really advantage in not selling. Since the company no longer completes all the filing requirements necessary to be listed, it will be delisted. Taking a company private is a good way of saving lots of legal and accounting expense and was particularly popular in the wake of Sarbanes-Oxley a few years back that increased these requirements.
mooism2 13y ago
Your question is a bit vague. Do you know what happens when a public company acquires another public company? Do you know what happens when a private company acquires another private company? What aspects of a private company acquiring a public company are you curious about?

2 points by geektips 13y ago

Hi Hackers , I like to know What happens when a private company acquires a public company ?

I can share some anecdotes from a family member who worked as a Senior Design Engineer at a semiconductor company which went from being a public company to being purchased by a private equity group. * His stock all converted to straight cash. This resulted in a pretty large tax bill as some of it was subject to capital gains tax since he'd only acquired it a few months before the acquisition. He probably should have planned for this better. * The company went into serious cost cutting mode. Much of the R&D was moved offshore into Design Centers in Israel and India. This put US-based engineers like himself into a fairly miserable position and he left soon after. I suspect most of this was done to improve the balance sheet and make it attractive for another public company to buy it, which still hasn't happened.

apagade 13y ago

A couple of things can happen and it primarily depends on why the private company was buying the public company. 1) Reverse Takeover mentioned by Raysor above. In this case the private company is taking over the public company with the aim of taking itself public. The goal here is to streamline the process of going public by just including all the assets of the private company with those of the already listed company. In this case, the stock continues to trade (possibly at a premium depending on the terms of the merger) but the underlying business has changed possibly dramatically. Several airlines have gone public through reverse takeovers. For some reason, I also know that Frederick's of Hollywood went public this way (they have excellent annual reports). 2) The public company might be taken private. In this case, a stockholder of the public company is given cash for his stock. He actually doesn't have to sell (unlike comments from previous posters) but there is not really advantage in not selling. Since the company no longer completes all the filing requirements necessary to be listed, it will be delisted. Taking a company private is a good way of saving lots of legal and accounting expense and was particularly popular in the wake of Sarbanes-Oxley a few years back that increased these requirements.

mooism2 13y ago

Your question is a bit vague. Do you know what happens when a public company acquires another public company? Do you know what happens when a private company acquires another private company? What aspects of a private company acquiring a public company are you curious about?