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Governance and takeovers: are public-to-private transactions different from traditional acquisitions of listed corporations?

Weir, Charlie; Wright, Mike


Charlie Weir

Mike Wright


Using a unique hand-collected dataset comprising 96 public-to-private (PTP) transactions and 258 acquisitions of listed corporations by existing corporate groups completed during the period 1998 to 2000, this paper investigates the extent to which PTPs have different internal and external governance and other characteristics from traditional acquisitions of listed corporations by existing corporate groups. The paper analyses acquisition activity during a period in which three new features were present: the decline in hostile takeovers, the increase in the adoption of governance Codes of Best Practice and the growth in PTP activity. PTPs are usually a response to takeover threat (Lehn and Poulsen, 1989) and so the paper analyses the acquisition decision from two perspectives: first, takeovers as a disciplinary mechanism which substitute for weak internal governance and second, as part of a non-disciplinary perspective where takeovers are complementary to internal governance mechanisms. We find support for the argument that improved internal governance and non-disciplinary takeovers, that is takeovers where the motive is not as a response to under-performing management, are complementary. PTPs are more likely to have higher board ownership and are likely to have duality of CEO and chairman. They are also more likely to have lower growth prospects and lower valuations. However, they do not have sub-optimal internal corporate governance structures in terms of lower proportions of outside directors. With respect to external governance, they are not more likely to experience pressure from the market for corporate control in the form of greater takeover speculation and are also not more likely to suffer hostile threats. We find that PTPs involving management buy-outs (MBOs) have fewer non-executive directors and a greater incidence of duality. MBOs also have higher board shareholdings. We find no evidence that management buy-ins (MBIs) have different characteristics. Our results suggest that going private by MBO may result from management's knowledge of private information that leads them to believe that the market has an incorrect perspective of the company's prospects.


WEIR, C. and WRIGHT, M. 2006. Governance and takeovers: are public-to-private transactions different from traditional acquisitions of listed corporations? Accounting and business research [online], 36(4), pages 289-307. Available from:

Journal Article Type Article
Acceptance Date Sep 1, 2006
Online Publication Date Feb 28, 2012
Publication Date Dec 31, 2006
Deposit Date Jul 8, 2021
Publicly Available Date Jul 8, 2021
Journal Accounting and business research
Print ISSN 0001-4788
Electronic ISSN 2159-4260
Publisher Taylor and Francis
Peer Reviewed Peer Reviewed
Volume 36
Issue 4
Pages 289-307
Keywords Governance; Takeovers; public to private (PTP); Acquisition activity
Public URL


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