Public offer of shares
|
The Government would sell shares in a SOE at a specific price to whomever has the cash to buy them
To promote local participation, the offer may be restricted to nationals. To promote widespread interest, the number of shares offered may be limited to a small number per bidder to maximize the number of investors in a particular entity. To allow for the fact that nationals may not be in a position to attract finance, the Government may allow discounts on the offer of shares
|
Private placement
|
The Government would sell shares to a single investor identified because that investor has unique attributes (e.g. an enterprise whose commodity has a single market to its customer). The price is determined through a process of negotiation
|
Trade sale through competitive bid
|
The Government sells the enterprise either as whole or in part (usually a majority holding) to another company or individual (either foreign or domestic) through a competitive process whereby interested purchasers submit bids which the Government evaluates according to a pre-determined set of criteria
A trade sale may be done in conjunction with a management/employee buyout, a public offering or may include some form of employee participation.
|
Sale of assets
|
The Government sells either all the assets or parts of the assets separately
This option may be considered when the enterprise is no longer a concern and would face bankruptcy in a commercial environment. As the liabilities of the enterprise exceed the assets, the assets may be sold in order to meet either part of the liabilities, or the liabilities are discounted
|
Management/employee buyouts
|
This method is similar to a trade sale, except that the purchaser is the existing management and/or the employees. The buyout proposal must show managerial ability and access to capital and markets in order to be effective in managing the enterprise. Management and employees may have difficulty in financing the purchase of the enterprise. In this case, a discounted share price or a leveraged buyout may be considered
|
Management contracts, leases and concessions
|
Where the Government does not wish to transfer ownership (particularly in the case of a natural monopoly), the Government may either enter into a management contract, a lease or a concession. In a management contract, the Government would pay a private company to manage the enterprise. Fees may be fixed or may incorporate a performance fee which reflects the profit that may be attributed to the private company managing the enterprise. In leases, the private party would pay the Government a fee to use the assets but assumes the commercial risk of the operation and the capital costs of maintaining the assets. Concessions are similar to leases except that the private party also is required to bear the costs of capital expenditures and investment. Concessions are usually used in the privatization of utilities
|
Joint-venture
|
The assets in the SOE would be transferred to a separate company formed as a joint-venture between the Government and the private owner. The Government would contribute the assets of the SOE and the investor would add his own assets (capital, technology, and access to markets) to the new company
|
Capitalization
|
Capitalization is a form of trade sale whereby the Government does not sell the assets, but rather would evaluate the need for investment in a enterprise. The amount of the investment would be sought from a private partner as equity in the enterprise. The relative values are assessed to establish the ownership ratio. After the enterprise is restructured, the shares held by the government may be sold using several methods (e.g. the shares may be sold to nationals when the enterprise is operating profitably on a sustainable basis)
|