Public to Private Transactions - A Cross Country Comparison:

Abstract: We analyze the pre-transaction characteristics of firms going private in the UK, France, Germany and the Nordic region from 2002-2006. We find that a firm’s propensity to go private is an increasing function of leverage, ownership and control, undervaluation and cash flows. A previously suggested explanation for the higher leverage in firms going private is the expropriation of pre-transaction debt holders. The theory is however rejected in this paper, as we find no sign of losses for these debt-holders. Additionally, we study if the incentives to go private vary across countries, depending on market conditions, taxes and corporate governance. Support is found for that, on a country level, a higher degree of corporate governance, and in turn efficiency of the takeover-market, increase the probability of going private.