Understanding Take-Private Transactions

A Guide for Private Equity Firms

Private equity (PE) firms operate in an environment where LPs expect them to deploy dry powder and find new deals, but competition for the most attractive private assets continues to be highly competitive.

Based on this and other contemporary market dynamics, take-private transactions have re-emerged as a compelling solution, offering an alternative path to deal flow and less front-end auction competition than traditional private-to-private deals. Take-private activity reached its second-highest annual volume on record in 2025 according to PitchBook, reflecting several converging market forces.

But while take-private deals come with certain advantages, the tradeoff is execution complexity, as orchestrating a take-private transaction comes with unique public market complexity and transforming a formerly public company can require broad organizational and operational changes. PE firms considering a take-private strategy need the appetite, capabilities, guidance, and resources to get the deal done and achieve success post-closing.

Here is what firms need to know before determining whether take-privates are the right strategic fit for them.

Why Take-Privates Are a Re-Emerging Opportunity for PE Firms

Growth in take-private activity reflects a growing set of pressures weighing on public companies. Public market volatility has impacted valuations and disrupted strategic growth plans across sectors. The rising costs of operating as a public company, from producing regular compliance reports to ongoing investor relations management can compound those challenges. In some cases, these pressures can constrain an organization’s ability to invest in long-term transformation.

The software sector illustrates this dynamic clearly. AI-driven disruption has compressed margins, accelerated business model change, depressed market caps, and introduced pricing pressure that is difficult to manage under public market scrutiny. Under private ownership, however, a business gains greater freedom to pursue large changes, from shifting its entity structure or operating model to developing new products or services. A private business can, for example, build a long-term AI value proposition without the constraints of quarterly performance expectations, which often penalize near-term margin pressure even when it is caused by necessary transformation investments.

Beyond the software sector, many businesses currently in the market originally went public as special purpose acquisition companies (SPACs) but are now very thinly traded. They find themselves in a difficult situation, absorbing the costs of being public without many of the benefits. As those pressures continue, these SPACs may also prove to be fertile ground for take-private explorations.

For PE firms, this environment creates an attractive deal channel. For example, take-private deals are not subject to the same competitive auction dynamics, such as pricey bidding wars between potential buyers, as private-to-private transactions. Financial data is publicly available, allowing firms to easily identify targets and build a more informed deal thesis before formally engaging a target. A take-private deal can support a growth thesis that would be difficult to execute under a public ownership model, making them an attractive option for PE firms looking to deploy new capital. 

Key Considerations & Risks

PE firms considering take-private transactions should keep several factors in mind:

Target Selection Strategy

The most attractive targets tend to be companies that are underperforming relative to their potential in an otherwise healthy industry. These are businesses where operational or strategic gaps, rather than broader structural decline, are the primary drag on performance. PE firms should also make sure not to limit their target search to companies within the NYSE or NASDAQ. They may also find worthy targets in other exchanges around the world.

Deal Process Tripwires and Nuance

Public company acquisitions follow different procedures and rules than private-to-private transactions. Once a firm formally expresses acquisition interest in a public company, it can trigger a defined sequence of regulatory and governance requirements. For instance, a target company is generally required by the SEC to disclose material events, such as a formal acquisition offer, to the public. Specifically, the target company must file a Form 8-K with the SEC within four business days of a material triggering event, which in turn will set off a cascading sequence of disclosures, waiting periods, and proxy filings. In the healthcare industry, another area seeing increased take-private activity, these deals can come with additional complex reimbursement, compliance, and other regulatory considerations.

Firms conducting early-stage target evaluation should understand these triggers and nuances, and structure their diligence accordingly. Doing so will help firms avoid inadvertently mandating disclosures or necessitating regulatory scrutiny, and ensure formal engagement only occurs when the firm is actually prepared to move forward with a transaction. 

Well-Defined Growth Thesis

The value creation thesis should be clearly articulable before a firm pursues a deal, and should cover the factors holding the business back, what new growth trajectories private ownership would enable, and why that path to growth is credible. Sector-level disruption does not inherently disqualify a target. The software industry, for example, is under significant pressure from AI, but that disruption creates opportunity for the right business and operator. The software companies worth pursuing are those with valuable underlying assets, streamlined costs and processes, a strong customer base, and the adaptability to reposition their AI value proposition under private ownership. That said, firms should take care to properly scope the cost, timeline, and organization required to execute AI-based technological transformation. Underestimating these variables is a common source of post-close underperformance.

Execution Complexity

A take-private transaction requires a different set of capabilities than a traditional leveraged buyout. The scope of transformation, including executing business model changes and managing the workforce and process shifts required for value creation, demands experience and infrastructure that PE firms may not have needed to develop for prior deals. A PE firm’s reporting requirements will also likely differ from those the new portco is used to. A formerly public company may be accustomed to reporting quarterly on financial performance, but PE firms require more regular reporting on both financial and operational key performance indicators (KPIs). Firms should not assume that a target’s reporting infrastructure will be up to the task simply because the company was once public. They will need to fully assess both their own and the target’s reporting capabilities before pursuing a deal. Without the right capabilities in place, the post-close period can become a drag on value rather than a driver.

Exit Planning

The intended exit, whether that is an IPO, a sale to a strategic buyer, or secondary PE transaction, should inform the transformation roadmap from the outset. Building the roadmap backwards from a defined exit gives the firm a more disciplined framework for prioritizing investments, allocating resources, and measuring progress throughout the hold period. It also allows firms to pivot their strategy more easily if variables change and the hold period extends beyond what was initially forecast.