IGCSE, A Level Business Student Forum

Q21 Analyse the factors that public company should consider before converting back into a private limited. [6]

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Possible Sample Answer:
[KN] Due to dilution of control in Plc
[AN] As the shareholders may intervene in decisions of managers, which may delay the decisions of business.
[AN+] Missing the opportunities like growth /upgradation of machines etc.

[KN] Difficult to justify the collection of investments from shareholders (time consuming)
[AN] There might not be a demand of shares, leading to fall in share prices
[AN+] This will negatively impact the brand image of the company & future prospects would be challenged.

[KN] Legal and regulatory requirement
[AN] Understand the legal and regulatory requirements for delisting and going private. This includes complying with securities regulations and stock exchange rules.
[AN+] Seek legal counsel to ensure that the process adheres to all legal obligations.

[KN] Costs and expenses
[AN] Going private can be costly. Analyze the expenses associated with the buyout process, including legal, financial, and transaction costs.
[AN+] These costs can be substantial and may impact the feasibility of the privatization.

[KN]financial resources and funding
[AN]this involves considering the source of funds such as cash reserves, external financing or support from private equity investors
[AN+]The company should conduct a comprehensive financial analysis to ensure it has the necessary resources to complete the privatization and continue its operations post-privatization

[KN]impact on employees and stakeholders
[AN]consider whether there will be any changes in employment policies, compensation structures or relationships with key partners
[AN+]effective communication and a well-defined transition plan are crucial to minimize disruption and ensure a smooth transition for all stakeholders

[KN] Shareholder Consent
[AN] In many cases, the decision to go private requires the consent of the company's shareholders.
[AN+] Convincing them to agree to the conversion can be challenging, as they may need to surrender their publicly traded shares in exchange for privately held shares.

[KN] Long-Term Strategy
[AN] The decision to convert to a private limited company should align with the company's long-term strategic objectives.
[AN+] The management and board should carefully assess how going private fits into the company's growth plans, capital needs, and overall business strategy.

(Kn)approval of share holders (an) before making the decision the share holders must be consulted with (an+) as if not asked then the would feel betrayed and shift to some other firm
(Kn) increase in costs (an) there would be costs attached to convert back to a plc like legal costs(an+) thus this would lower profits for the firm due to increased costs

[KN] Costs of Going Private
[AN] he process of going private can be expensive.
[AN+]The company should evaluate its ability to meet these financial obligations.

[KN] approved by the shareholders
[AN] their should be a meeting which they decide if they would go private or not
[AN+] this would satisfy the shareholders

[KN] Due to dilution of control in Plc
[AN] As the shareholders may intervene in decisions of managers, which may delay the decisions of business.
[AN+] Missing the opportunities like growth /upgradation of machines etc.



[KN] Difficult to justify the collection of investments from shareholders (time consuming)
[AN] There might not be a demand of shares, leading to fall in share prices
[AN+] This will negatively impact the brand image of the company & future prospects would be challenged.

[kn] dilution of control in private limited company
[an] as shareholders will continuously intervene in different decisions a manager takes
[an+] causing delay in decisions making of businesses therefore missing the opportunities like growth
[kn] difficult to justify the investment collections from shareholders.
[an] which can be time consuming and therefore shares demand will decrease leading to a fall in prices
[an] this will negatively impact the brand image of the company and future prospects would be challenged

[KN] Due to dilution of control in Plc
[AN] As the shareholders may intervene in decisions of managers, which may delay the decisions of business.
[AN+] Missing the opportunities like growth /upgradation of machines etc.


[KN] Difficult to justify the collection of investments from shareholders (time consuming)
[AN] There might not be a demand of shares, leading to fall in share prices
[AN+] This will negatively impact the brand image of the company & future prospects would be challenged.

Kumail Alvi wrote: ↑Thu Nov 02, 2023 3:29 am [KN] Shareholder Consent
[AN] In many cases, the decision to go private requires the consent of the company's shareholders.
[AN+] Convincing them to agree to the conversion can be challenging, as they may need to surrender their publicly traded shares in exchange for privately held shares.

[KN] Long-Term Strategy
[AN] The decision to convert to a private limited company should align with the company's long-term strategic objectives.
[AN+] The management and board should carefully assess how going private fits into the company's growth plans, capital needs, and overall business strategy.

both analysis points might aswell not be there cuz i aint seeing any direction in them

KN: Costs of Conversion
AN: Assess the financial implications of the conversion process, including legal and administrative expenses
AN+: Determine if the potential benefits outweigh the costs
KN: Shareholder Approval
AN: Check legal and regulatory requirements for shareholder approval
AN+: Converting back to a private limited company often requires approval from a significant majority of shareholders

(KN) financial resources and funding
(AN) this involves considering the source of funds such as cash reserves, external financing or support from private equity investors
(AN+) The company should conduct a comprehensive financial analysis to ensure it has the necessary resources to complete the privatization and continue its operations post-privatization

(KN) impact on employees and stakeholders
(AN) consider whether there will be any changes in employment policies, compensation structures or relationships with key partners
(AN+) effective communication and a well-defined transition plan are crucial to minimize disruption and ensure a smooth transition for all stakeholders

[KN] dilution of control
[AN] as there may be a lot of people to get approval from hence delayed decision making.
[AN+] less chances to avail opportunities like expansion

[KN] it may be difficult to justify the investment
[AN] There might not be a demand of shares, leading to fall in share prices
[AN+]hence negatively impact the brand image of the company