Implementing a Public-to-Private Deal

1 Day In-House Training Course

For a quoted company whose shares trade in an illiquid market at a price that consistently fails to recognise its prospects, the rationale for ‘going private’ is compelling.

Private equity houses have a strong appetite and ample funds to invest in established companies with sufficiently predictable cash flows to service the debt raised to finance a ‘public-to-private’ deal.

This 1-day, in-house, training course will enable participants to gain a detailed understanding of the financial, legal and regulatory processes of taking a public company private.

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Course Outline

  • Planning to Leave the Market

    • Rationale for Going Private – declining share price & pointless pressure
    • Absolute Secrecy – finalise everything before it leaks
    • Negotiations between NewCo and TarCo – strictly commercial but accepting reality
    • Gathering Support – irrevocable undertakings
    • Making the Offer – initial institutional reaction
    • Build a stake in TarCo to deter rivals? – possibility of insider dealing

  • P2Ps and the Takeover Code

    • All the Rules Apply – 6 General Principles & 14 rules for particular consideration
    • Concert Parties – presumptions & problems
    • Resolution of Conflicts of Interest – maintaining a level playing field
      • Rule 3 Advisers – must be obviously independent
      • Independent Committee – the responsibilities of non executive directors
      • Disclosure of Information – confidential information belongs to the company
      • Special Incentivisation for the P2P Team – how is it allowed?

  • The P2P Decision

    • P2P Team’s Essential Question – does the potential reward match the inevitable risk?
    • Estimating the Offer Price – initial guesstimates on value
    • How Much Should the P2P Team Invest? – negotiations with the Private Equity House
    • How Much Equity Should They Get? – consider the exit route, exit timing & exit price
    • Anticipating the Risks – leaks, lost jobs, escalating costs & damaged relationships
    • The Business Plan & Financial Model – evaluate cash flow to determine ‘head room’
    • Appointment of Advisors – who to choose first?
    • Initial Discussions with a Private Equity House – all cards face up on the table
    • Solicitors for the P2P Team – lock out, release of information, service contracts
    • Solicitors for NewCo – internal & external documents required

  • Structuring the Deal

    • Dividing Up the Equity – sweet equity, quasi equity & ratchets
    • Junior Debt – PIK, mezzanine, zeros & bridging finance
    • Senior Debt – core acquisition loan, security & alphabet notes
    • The ‘Certain Funds’ Rule – period of availability & allowable conditions precedent
    • Keeping within the Financial Assistance Rules – the three debenture approach

  • Conduct During the Offer

    • Takeover Code Timetable – Day 0 to Day 95
    • Declaring the Offer Unconditional at 75% or 90% – subject to lenders’ agreement
    • Dealing with Minorities – squeeze out provisions
    • Share Exchange Agreements – the offer must be the same for all shareholders
    • Retaining a Minority – some institutions may refuse to sell
    • Delisting – application to the UKLA

  • Alternatives to a Takeover Offer

    • Schemes of Arrangement – advantages & disadvantages
    • P2P Lite – a cheap short cut for smaller companies
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Course Notes, Slides and Exercises

Participants will receive a booklet containing copies of 18 slides and 60 pages of very comprehensive notes. Each slide will cover a number of related topics and the accompanying notes will support the content of the course to be delivered by the trainer.

During the course of the day, participants will undertake one or two exercises (problems) in groups of two or three (depending on the size of the class) which will involve considering what advice should be given to a client in particular circumstances. Participants will discuss the exercise with each other and then with the trainer and will receive a written answer to the problem.

Exercise 1

Your company has just concluded its AGM – a complete waste of time. You and your fellow directors decide that the company should be taken private (P2P) and discuss the contractual formalities, conflicts of interest and takeover code rules that need to be addressed.

Exercise 2

The P2P team intend to appoint a private equity house to assist with the public-to-private deal but, before doing so, have asked you to calculate (on the information that they have given to you) their likely shareholding and to explain the basis on which the private equity house is likely to negotiate such shareholding.

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