What is a going-private transaction?

In everyday use, a company goes private when it's bought and its shares stop trading. Under SEC rules, a going-private transaction is narrower.

Rule 13e-3 covers deals where the company itself or an affiliate is on the buying side. The deal must also be likely, or meant, to delist the shares or let the company stop filing reports.

An affiliate is a person who controls the company, is controlled by it, or is under common control with it.

Say Litware's chief executive joins a fund to buy Litware at $50.00 a share. With an insider on the buying side, the deal can be a going-private transaction.

If an outside fund buys Litware alone, the shares still stop trading. But the deal usually isn't a going-private transaction under the rule. What matters is who is on the buying side.

In these deals, insiders sit on both sides. They often know things other holders don't, and as buyers they gain from a lower price.

Other holders sell at that price. So the rule asks for more disclosure than other deals get. It also bars material misstatements, and leaving out facts needed to keep statements from misleading.

The rule adds disclosure; it doesn't set the price or approve the deal. The document's cover must say the SEC hasn't approved the deal or judged its fairness.

The company and the affiliates engaged in the deal file a Schedule 13E-3 with the SEC, often together. Holders get its key parts in the proxy statement or the offer document.

Beyond the usual deal disclosure, it adds:

Purposes and alternatives

Why the deal is being done, why now and in this form, and what else was considered.

Fairness

Each filer must say whether it reasonably believes the deal is fair or unfair to holders who aren't affiliates, and why.

The vote

Whether the deal is set up to need approval from holders of a majority of the shares not held by affiliates.

Outside reports

Any report, opinion or appraisal from an outside party that's materially related to the deal and that the filers received. Each is summarized, and written ones are filed. Legal opinions are left out.

Timing

In a deal put to a vote, holders must get this information at least 20 days before the vote.

The first four sit in a section called Special Factors, at the front of the document.

One count took 36 deals announced in 2024 in which private equity or similar buyers agreed to buy public companies based in the US. Each had an enterprise value of $50 million or more. In the everyday sense, all 36 were deals to take a company private.

Only 10 of them, 28%, were going-private transactions under Rule 13e-3. In its 2023 count, the share was 27%.

Boards formed a special committee of independent directors in 36% of the 36 deals. They did so in all 5 deals started by a holder of more than 10%.

In December 2024, Nordstrom agreed to be bought for $24.25 a share in cash. The buyer was formed by members of the Nordstrom family and Liverpool, a Mexican listed company.

The family members included the chief executive, Erik Nordstrom. With insiders on the buying side, Nordstrom and the buying group filed a Schedule 13E-3.

A special committee of independent directors recommended the deal. Erik and Peter Nordstrom, both directors, stepped aside from the board's decision.

The committee and the board each said the deal was fair to unaffiliated holders. The buying group said so too.

But the buying group also stated that it had sought the terms most favorable to itself, not to other holders. The deal closed on May 20, 2025.

A going-private deal tells holders more than most deals do: each filer's view on fairness, its reasons and the outside reports.

It doesn't guarantee a higher price or a closing. Whether holders vote or choose to tender depends on how the deal is set up.

Holders who don't accept the price may have appraisal rights. The document must describe any that holders have.

The checklist says whether the filings say a Schedule 13E-3 may be required, is required or was filed. In it, the company and the buyers each give their view of the deal's fairness.