The Role of Disclosure in Closing Going Private Deals.

Abstract

There is a perceived conflict of interests in going private transactions, resulting from
transferring a company’s ownership and control to affiliated parties and terminating
its public status. These deals are subject to mandatory disclosure requirements, aimed
to inform shareholders before the transaction is put to a general vote. However, the
expected incremental role of these disclosures is uncertain. We demonstrate that disclosure
volume is positively associated with the likelihood of closing a deal and with the
time between its announcement and resolution. Next, we find that disclosure volume is
positively associated with three proxies for the intensity of shareholders’ negotiations:
upward price revisions, disclosure amendments, and litigation. Our findings o↵er insights
into the incremental benefits and costs of disclosure in this setting. Increased
disclosure can facilitate the completion of going private deals, but exiting shareholders
can also use it to delay the closing date and negotiate better terms.

Keywords: Going private; disclosure; textual analysis.

JEL Classification: M41, M48, G34