If we take a look at some of the most notable buyouts that took place in the UK in the last decade, the evidence on the relationship between analyst following, insider ownership and the probability of being taken private is mixed. For example, in 2007 a US private equity firm Kohlberg Kravis Roberts (KKR) acquired a Swiss pharmaceutical company Alliance Boots, which was at listed on the London Stock Exchange at the time of the deal. Alliance Boots had almost no insider ownership at that time (around one-hundredth of a percent) and had relatively few analysts following it considering its size. Conversely, in 2009 the management of Regent Inns, an owner of chains of bars and restaurants, stood ready to buy out the remaining stake in the troubled company, whilst already owning more than 50% of it.
Notwithstanding the fact that Regent Inns was in shaky financial conditioned and majority management-owned, it was still followed by quite a lot of analysts (relative to its modest size). However, no definite conclusions can be made based on those isolated cases and it would be of interest to establish the relationship between analyst following, insider ownership and the probability of being bought out for UK firms by conducting an empirical study on the determinants of the probability of public-to-private deals. In our study we will also pay attention to other factors previously identified as important in the literature on this topic.
This leads us naturally to our research question and research goal. In this study we answer the following research question ―Which factors are related to the probability of a company being taken private? The research goal is to establish the relationship between analyst following, insider ownership and the probability of it being bought out. In order to meet the research goal the following objectives were set:
(1) Conduct a critical review of relevant literature on the topic;
(2) Classify the determinants of public-to-private transactions;
(3) Conduct an empirical study aimed at revealing the determinants of public-to-private transactions in the UK;
(4) Analyse the results, make conclusions and suggest possible implications for investors and the stock exchange.
Inhaltsverzeichnis (Table of Contents)
- INTRODUCTION
- CHAPTER 1. THEORETICAL BACKGROUND
- 1.1. Public-to-Private Transactions: Literature Review
- 1.2. Determinants of Public-to-Private Transactions: Classification
- 1.3. Case Studies: Buyouts of Alliance Boots and Regent Inns.
- 1.4. Hypotheses Formulation
- CHAPTER 2. EMPIRICAL STUDY
- 2.1. Research Design
- 2.2. Sampling and Data Collection.
- 2.3. Empirical Results & Discussion
- CONCLUSIONS
- LIST OF REFERENCES
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis examines the factors influencing public-to-private transactions on the London Stock Exchange. It aims to establish the relationship between analyst following, insider ownership, and the probability of a company being taken private. The thesis will critically analyze relevant literature, classify determinants of public-to-private transactions, conduct an empirical study for UK-listed firms, and analyze the results to draw conclusions and suggest managerial implications.
- Determinants of public-to-private transactions
- Analyst following and its impact on company valuation
- Insider ownership and its role in public-to-private transactions
- Empirical analysis of UK-listed firms
- Managerial implications of the findings
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the context for the thesis by discussing the different ways in which companies can be delisted from the London Stock Exchange, focusing on public-to-private transactions, including institutional buyouts (IBOs), management buyouts (MBOs), and management buy-ins (MBIs). It highlights the growing prominence of public-to-private transactions in the UK since the late 1990s.
Chapter 1 delves into the theoretical background of public-to-private transactions. It provides a comprehensive literature review on the subject, classifying the determinants of these transactions and examining case studies of buyouts of Alliance Boots and Regent Inns. The chapter culminates in the formulation of hypotheses related to the relationship between analyst following, insider ownership, and the likelihood of a company being taken private.
Chapter 2 outlines the empirical study conducted to test the hypotheses. It details the research design, sampling methods, and data collection procedures. The chapter concludes with a discussion of the empirical results.
Schlüsselwörter (Keywords)
The core concepts explored in this thesis include public-to-private transactions, institutional buyout, management buyout, analyst following, insider ownership, UK-listed firms, empirical analysis, and managerial implications. The study focuses on establishing the link between these factors and the likelihood of a company being taken private.
Frequently Asked Questions
What is a "Public-to-Private" (PTP) transaction?
It is a deal where a publicly traded company is delisted from the stock exchange and becomes a private company, often through a buyout.
How does analyst following affect the probability of a buyout?
The study investigates if companies with fewer analysts following them are more likely to be taken private due to potential undervaluation by the market.
What role does insider ownership play in PTP deals?
High insider ownership can either facilitate a management buyout (MBO) or act as a deterrent for hostile takeovers by institutional firms.
Why are Alliance Boots and Regent Inns used as case studies?
They represent contrasting examples: Alliance Boots had low insider ownership, while Regent Inns was majority management-owned before going private.
What are the main objectives of this research?
To classify the determinants of PTP transactions and conduct an empirical study on firms listed on the London Stock Exchange (LSE).
- Quote paper
- Maksim Adaskevich (Author), 2015, Determinants of Public-to-Private Transactions. Evidence from the London Stock Exchange, Munich, GRIN Verlag, https://www.grin.com/document/370058
