Take-private transactions dominated the list of the largest unsuccessful private equity bids globally in 2021, according to S&P Global Market Intelligence data.

Of the top 15 largest unsuccessful bids made public in 2021, 14 bids targeted public company buyouts, the data shows. That compares with nine of the top 15 unsuccessful bids in both 2020 and 2019.

The true extent of private equity plays to take a public company private is likely to be much higher; regulatory requirements in some jurisdictions mean that only some of these scenarios play out in public.

In the U.K., for example, the Takeover Code requires details of a potential deal to be announced if there is a leak, Macfarlanes LLP partner Richard Burrows, who has advised on public takeovers, said.

"I'd probably go as far as to say the overwhelming majority of cases where a board has been approached by a private equity house won't necessarily be made public," Burrows added.

Bids by large-cap private equity firms monopolized the list, which is unsurprising given the larger companies they target tend to be public. "Businesses of that size in private markets are just not as common, but they also tend to be held by people that aren't necessarily looking to sell," said Alex Edmondson, head of MacFarlanes' private equity practice.

That some high-profile private equity bidders were unsuccessful in taking a company private is symptomatic of the competitive landscape, Edmondson added.

Dry powder, the search for targets

The public-to-private sphere is one "tiny aspect" of the private equity M&A market, which saw an extremely active 2021, and the number of private processes compared with bids for public companies "is enormous," Edmondson said.

Both private and public transactions have challenges, and neither are straightforward to execute, Edmondson said. "The holy grail for any sponsor is the proprietary off-market private company acquisition that's just done quietly on a bilateral basis with no competition. But unfortunately, those are very few and far between these days."

On the sell side, all large private U.K., European and U.S. companies have likely been approached by a possible buyer at some stage, said Jamie Austin, head of private equity at BDO LLP. Many will not entertain a potential buyer until it suits their purposes to fuel growth or fund change because somebody wants to exit the business.

Take-privates are particularly difficult, and BDO has worked on more deals that have not happened than deals that have gone through, the firm's head of global M&A, John Stephan, said. Reasons for this include issues during the due diligence process, pricing getting out of kilter, rejection by a big shareholder or a higher rival bid.

With public companies, "institutional shareholders will always sell, it's just a question of the price. They might like the stock they're invested in but only up to a point. There's a price where it's quite compelling, and they'll take the profit," Stephan said.

Firms traditionally have "been shy of PR and the spotlight. It's called private equity — I've read one quote recently from a sponsor saying the clue's in the name," Edmondson said. But with record amounts of dry powder available and a hot market, they are more willing to "stick their head above the parapet and pursue these bigger public companies," Edmondson added.