What Are Private Acquisitions?

Mary McMahon

Private acquisitions are takeovers of private companies, where the transaction can take place without public attention because no public filings or discussions are necessary. These sales occur around the world at a variety of scales. Some private companies are extremely large and may have considerable clout in their industries, while other are smaller and may use such deals to expand their reach and scope. Financial publications may discuss particularly notable private acquisitions when they occur, and may also engage in speculation about rumored deals of various sizes.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Some private companies put themselves up for sale to other companies, usually advertising discreetly through industry channels. Word of mouth is a popular approach, where a company makes it generally known that it is available for sale and waits for offers. Others may work through a firm that facilitates private acquisitions to locate a buyer and reach an agreement. Company founders may sell a company for a variety of reasons; sometimes they deliberately build up the company for sale, while in other cases they may simply want a career transition.

Buyers with an interest in private companies can also seek out companies and approach them about mergers and acquisitions. Private companies can buy and sell other companies without needing to be accountable to shareholders or members of the public and may seek out companies that will mesh well with their goals and business ethics. A florist, for example, could buy a florist in a neighboring town to increase coverage and add more services for customers.

A private acquisition may attract attention if it is large or involves key industry players. Government regulators can become involved in private acquisitions if there are concerns about the creation of a monopoly through the sale, although this is highly unusual with private companies. These companies are usually too small to be able to monopolize an industry, as big players tend to become big by going public to raise capital and increase their dominance in the market.

Transactions on the private market can be important for investors to know about. Public companies may do business with private ones, and a private acquisition could raise supply prices or create other issues for a public company. These sales can also be precursors to the introduction of new products, where the merger combines the expertise and development of both companies to generate a new line of products or services. Private acquisitions may also precede a purchase by a public company, in which case knowing as much as possible about the private company will allow interested parties to decide if it is a good investment.

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