Financial support from Barclays Private Equity and Deloitte is acknowledged. The helpful comments of John A. Doukas (the editor) and two anonymous referees are acknowledged with thanks. We would also like to thank David Laing and Louise Scholes for research assistance. We would also like to thank participants at seminars at Cass Business School, Cranfield Business School, Kings College London University and at the Department of Trade and Industry. The usual disclaimer applies. Correspondence: Charlie Weir.
Irrevocable Commitments, Going Private and Private Equity
Article first published online: 13 AUG 2007
European Financial Management
Volume 13, Issue 4, pages 757–775, September 2007
How to Cite
Wright, M., Weir, C. and Burrows, A. (2007), Irrevocable Commitments, Going Private and Private Equity. European Financial Management, 13: 757–775. doi: 10.1111/j.1468-036X.2007.00382.x
- Issue published online: 13 AUG 2007
- Article first published online: 13 AUG 2007
- public to private transactions;
- irrevocable commitments
This paper adds to growing interest in public to private buy-outs and mechanisms to ensure bid success. Using a unique, hand-collected dataset of 155 public to private buy-outs we provide one of the first examinations of the determinants of irrevocable commitments. Irrevocable commitments involve undertakings given by existing shareholders to agree to sell their shares to the bidder before the bid to take the company private is announced. We find that, for management buy-outs, the level of irrevocable commitments is increased by the bid premium, the reputation of the private equity backer and board shareholdings. The level of irrevocable commitments is reduced by rumours of a takeover bid and bid value. We therefore find evidence that management and private equity firms' activity prior to the bid's announcement can have an important impact on the process of going private.