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Leveraged Public to Private Transactions in the UK
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Abstract
This paper examines the magnitude and the sources of the expected shareholder gains in UK public to private transactions (PTPs) in the second wave from 1997-2003.Pre-transaction shareholders on average receive a premium of 40% and the share price reaction to the PTP announcement is about 30%.The main sources of the shareholder wealth gains are undervaluation of the pre-transaction target firm, increased interest tax shields and incentive realignment.An expected reduction of free cash flows does not determine the premiums nor are PTPs a defensive reaction against a takeover.Public to private;going-private;LBO;MBO;IBO;Management buyins;Management buyouts;Leveraged buyouts