Motivations and Performance of Public to Private operations : an international study

This article deals with the motivations and the different sources of value from Public to Private Transactions in Europe, USA and Asia from 2000 to 2007. We determine eight main motivations (Tax savings, Incentive realignment, Control, Free Cash Flow, Growth of Prospects, Transaction Costs, Takeover Defence and Undervaluation). Then, we evaluate the shareholder wealth by measuring the offered premiums and the CAAR (Cumulative Average Abnormal Return). Finally we analyse the impact of Public to Private to the wealth shareholder. The main sources for firms from going private are incentive realignment, Free Cash Flow (mostly for Asia), the economy of cost transaction and undervaluation. Furthermore, taxation benefit is a source of wealth effects for Asia and Family blockholder (for the control hypothesis) is significant for Europe. Premiums and CAAR are the most important for the USA and Asia. The main observation that we have made, is that Asia gets the same behavior as the USA.