Going Private Transaction: Structure

Structure for Going Private Transaction

Like any other acquisition of public companies, a going private transaction is generally accomplished in one of the two ways:

One-step merger
tender offer followed by a back-end merger (known as a two-step merger)

Besides, whether a going private transaction involve a controlling stockholder affect the structure of the transaction. A going private transaction by a controlling stockholder creates an inherent conflict of interest. The controlling stockholder seeks to acquire entire ownership of the target company, while it owes fiduciary duty to minority stockholders. If a lawsuit challenging a going private transaction by a controlling stockholder, thus, is filed, a Delaware court will apply the stringent entire fairness standard of review.


A going private transaction may also involve an acquisition of a public company by a non-controlling stockholder or a leveraged buyout of a public company by a private equity firm or other third-party acquiror working with management. Although these non-controlling stockholders do not owe fiduciary duties to these other stockholders, Delaware courts held that certain types of going private transactions may triggered entire fairness standard of review unless procedural safeguards are implemented to protect public stockholders.