While 2025 began with a sense of optimism, the stock market has been increasingly volatile amid ongoing geopolitical uncertainty. Many businesses are reassessing their strategies—prompting some to consider going private.
If you are weighing the pros and cons of going private, there are many factors to consider. We summarize the benefits of going private and give an overview of how a public company incorporated in Canada may execute a going private transaction.
What does it mean when a public company goes private?
In general, going private involves a transaction which has the effect of converting a public company into a private company. In practical terms, the process entails:
- The transfer of a public company's voting or equity securities from the hands of public shareholders to the hands of one or few shareholders.
- A delisting of the company's securities on a public market.
- The company ceasing to be a reporting issuer (as defined in the applicable provincial securities laws) in Canada.
What companies should consider before going private
Going private can offer companies relief from the pressures of public markets, especially during uncertain economic or geopolitical climates. For some, it's a strategic move to enable long-term planning without the demand to meet shareholders’ short-term expectations. As a result, management can focus more freely on investments that will yield long-term growth.
Before making the shift, businesses should consider if private ownership provides the flexibility or control they’re seeking. For example, after being acquired by a PE firm, you will meet with the board and investors on a regular basis to ensure the agreed-upon strategy is being executed and fulfilled. PE firms are more of a hands-on investor that will be able to help execute your strategy.
If a company decides to sell, it’s generally to a PE firm or another corporation. There are some key differences depending on the route the organization decides.
Management should consider their personal objectives before entering into any sale agreement. A sale to a PE firm would continue to require their personal involvement post-close. On the other hand, a sale to a strategic buyer could potentially make their roles redundant, which would have them transfer out of the business more quickly.
PE firms and strategic buyers also have different objectives. Under PE ownership, the company will typically operate as a standalone entity. The PE firm will apply its operational and financial expertise to enhance the business with the intention of exiting the investment—usually within five to seven years. If purchased by a strategic buyer, the company will be integrated into the business, and the buyer typically doesn’t intend to divest the business.
Another key factor to assess is the broader impact on stakeholders. Leadership must consider how the move will affect employees, clients, and shareholders. It’s also important to consider regulatory obligations and governance changes.
Market participants now more clearly understand the advantages of being a private company. Going private can enable struggling companies to restructure, institute operational changes, and turn things around—possibly returning to the public markets in the future.
Here are 5 reasons why public companies should go private:
5 reasons why public companies should go private
The advantages of being a private company has become better understood over the years while the scrutiny and other issues that go along with being a public company have increased.
Read moreIn addition to these five reasons, going private also reduces or eliminates certain risks inherent in the operation of a public company, including:
A depressed market price for a company's voting securities (as compared to the value of the company's assets) provides an opportunity for a hostile takeover of the company.
How can public companies go private?
A Canadian incorporated company may structure a transaction to go private in a few different ways; the three most common are as follows:
A plan of arrangement is a court-supervised restructuring process carried out by the target public company's governing corporate statute. A plan of arrangement is typically negotiated between the prospective purchaser and a target public company's board of directors. Shareholder approval is required as well as court approval, which requires the court to determine that the terms of the arrangement are “fair and reasonable” to the shareholders of the target company.
A takeover bid is an offer to acquire the voting or equity securities of a target company made to shareholders in a Canadian jurisdiction provided that, prior to the bid, the bidder and any person acting jointly or in concert with the bidder own or control 20% or more of the outstanding class of securities on a partially diluted basis. Takeover bids are regulated by the securities laws of the provinces and territories where the holders of securities of the relevant class are located. Securities regulators have harmonized the takeover bid regime across all of the jurisdictions within Canada.
An amalgamation is a statutory means under corporate legislation of combining two or more companies into a single successor company. An amalgamation may be structured in a number of ways. Typically, upon amalgamation, the purchaser receives all the voting shares of the amalgamated company in exchange for its shares in the target company and all the shareholders of the target receive either cash or, more commonly, redeemable shares in the amalgamated company.
When the transaction is completed, the redeemable shares of the amalgamated company are immediately redeemed for cash. The result is that the purchaser becomes the sole shareholder of the amalgamated company. To approve the amalgamation, a shareholders meeting of the purchaser and target company is called. The shareholders of both companies must approve the amalgamation by passing resolutions. Under corporate law, the amalgamation must be approved by holders of two-thirds of the shares of the target company represented at the meeting, in person or by proxy.
The decision to choose one type of structure over another generally depends on the timing, regulatory considerations, financing requirements, and other strategic considerations of the parties involved.
Delisting a public company
To delist the issuer's securities from the public market and apply to cease being a reporting issuer in Canada, the issuer is required to:
- Submit a written request to the Canadian stock exchange where its securities are listed for a delisting of its securities as per the policies of that exchange.
- File an application with its principal regulator for an order that it has ceased to be a reporting issuer in all jurisdictions of Canada which it is a reporting issuer pursuant to National Policy 11-206 Process for Cease to be a Reporting Issuer Application.
2025 private equity in Canada report
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