Introduction

There are different set of rules and regulations for the political and economic side of

privatization, which conclude that privatization can be defined as deliberate sale by a

government of state-owned enterprises (SOEs) or assets to non-public economic agents, which is

currently in use worldwide. Privatization was first introduce by Britain’s hatcher government in

the early 1980s in a public meeting public that included many economists, privatization today

appears to be accepted as a practice and a tool as well, used and adopted governments of more

than 100 countries. Privatization is one of the most important parts of the continued international

development of the increasing use of markets to assign resources

It should be pointed out that there was a major spread of privatization programs around

the world during the past 2 decades, which allow to conclude that the different discussion on

economic and political level about the government versus private ownership has been developed

allowing some changes in the point of views. Still this point can be argued since twenty years

ago the proponents of state ownership might even as simply have surveyed the postwar rise of

state-owned enterprises and over that their model of economic organization was winning the

intellectual battle with free market capitalist economy.

Because of the heavy attention that the press has given to the worldwide movement

toward markets, particularly toward privatization of state-owned enterprises, many has

concluded that privatization has almost overtake the involvement of state-owned enterprises in

world economic activity. But this statement isn’t considered to be accurate or right. To

understand the impact of privatization on the state’s role in several economies, the history from

nationalization and privatization should be studies.

Throughout history, there has been a mix of public (often together with non-secular

institutions) and private companies that are related to the production and commerce. Sobel

(1999) writes that public owning was related to production, such as mills and metal operating,

was common within the ancient geographical region, while the private type was more connected

to trade and cash loaning. In ancient Balkan state, the government owned the land, forests, and

mines, but provided the work to people and companies. While within the Ch'in dynasty of China,

the government controlled the salt and iron. Sobel notes that within the Roman Republic the

"publicani (private people and companies) consummated nearly all the of the state's economic

needs." Rondinelli and Iacono (1996) note that by the time of the Industrial Revolution in the

western industrial societies and their colonies, the private sector was more advance over the

public sector providing the necessary commercial merchandise and additionally necessary in

providing public merchandise and services. This pattern, with more government involvement in

some countries and fewer in others, continuing into the 20 the century in both Western Europe

and its colonies and former colonies. While in the United State, there was less government

involvement than several alternative countries.

government into to play more a vital role, since the government was producing different kinds of

products and services, in much of the world. Still in Western Europe, governments debated to

which extend they needed to regulate the local economy and which industrial sectors should be

kept aside for the public under the control of the government. Until the Thatcher government

came to power in 1979, the solution to the current debate within the U.K and in different part of

the world was that the government should always have control on a minimum of these sectors

that are the telecommunications and postal services, electrical and gas utilities, and most sorts of

non-road transportation (especially airlines and railroads). Still several politicians believed that

that the government should manage more “strategic” producing industries, like steel and defense

production. In several countries, state-owned banks were additionally given either monopoly or

protected positions, as mentioned in La Porta, Lopez-de-Silanes and Shleifer (2000a).

Rondinelli and Iacono (1996) argue that government possession grew within the

developing world for slightly completely different reasons, primarily that government possession

was perceived as necessary to push growth. within the post-colonial countries of Asia, Africa,

and others, governments did a speedy growth through serious investment in physical facilities.

one more reason for state possession, often through nationalization, which is considered to be a

hostile act against the existing of the foreigners in the same country since they used to own and

control the most important firms inside the country itself. (Noll 2000).

Thus, there had been a major growth within the use of SOEs throughout different part of

the world, especially after the World War II, that helped in the development of privatizations

many decades later. The modern privatization programs started with Margaret Thatcher’s

Conservative government, which came to power in United Kingdom at 1979. On the other hand,
the Adenauer government within the Federal Republic of Germany launched the primary large-

scale, ideologically driven by "denationalization" program of after war era. In 1961, the German

government sold-out a majority stake in Volkswagen in a very public share giving heavily

weighted in favor of tiny invested amount. Four years later, the government launched a more

advance offering for shares in VEBA. Although the offerings were at first accepted and investors

were happy about it, but the shareholders failed to survive the first event of down turning in the

prices of the stock, which in return the government was forced to bail out several shareholders.

Still it took another European nation around 20 years to apply another government privatization

as a core economic or political policy.

Although the Thatcher government was the first to launch an outsized privatization

program, but it was considered to be the most important historically. Privatization wasn't a

significant campaign theme for the Tories in 1979, however the new Conservative government

embraced the policy. Margaret Thatcher adopted the label “privatization” that was originally

coined by Peter Drucker and that replaced the name denationalization (Yergin and Stanislaw,

1998, 114).” Early sales were strenuously attacked by the Labour opposition, that secure that if it

were reelected it might to renationalize divested corporations like British Aerospace and Cable

and Wireless.

It was not till the British telecommunication success in the initial public offering in UK

around November of 1984 that privatization became established as a basic policy within the

kingdom. A series of more and more large share issue privatizations (SIPs) throughout the

second half of the Eighties and early Nineteen Nineties which reduced the role of SOEs in the

British economy to basically nothing once the Tories left the government in 1997.
 We note that the objectives set for British privatization program by the conservatives

were virtually identical to those listed by the Adenauer government twenty years before, and

nearly each government within the following years. These goals, as delineate in worth

Waterhouse (1989a, b):

(1) raise revenue for the state

(2) promote economic potency

(3) cut back government interference within the economy

(4) promote wider share possession,

(5) given the chance to introduce competition,

(6) subject SOEs to plug discipline.

Still another important major objective that was mentioned by the Thatcher and

following governments is to develop the local capital market. The perceived success of British

privatization program helped persuade several different industrialized countries to start divesting

SOEs through public share offerings. Jacques Chirac’s government, that came to power in

France in 1986, privatized around 22 corporations (worth $12 billion) before being ousted in

1988.

The above was a presentation on the idea of privatization by the government while on the

other side on the economical side there is a different between Private and Public company.
 Private and Public Companies

Although there is no limit for the size of any kind of a company weather it is a Public or

Private. Both companies can be considered as a huge the only main different is how the capital

funds is collected and what is the source of the funds. Usually the Public company depend on the

general public to support and not related to any ownership, but still the public need to operate

according to the SEC which is the Rules and Regulations for the Securities and Exchange

Commission and Major Securities Laws. While on the other hand the private companies

depending on funding from investors and capital. And thus they don’t need to provide the public

any information about the gain and loses they are generating.

A public company will sell its own registered securities to the public available in the

market. once associate initial public offering, the organization becomes a public company. A

public company also can be termed as a publically listed company.

Publicly listed company implies that the corporate will interchange public capital markets

and may directly sell its shares to the general public. As per the USA Securities and Exchange

Commission (SEC), when the organization acquire more than $10 million in assets and around

500 users, it needs to register with SEC and should follow all the news standards, rules, and laws

that are set by the SEC. Usually a public company is divided between shareholders, board of

directors and the management. The company trade it is stock in the market in order to expand its

presents to more markets and collect more market share by reaching to the public. While on the

other hand a private company is different from a public company. Usually the private company

isn’t able to trade and set shares in the market for general market to trade them. Also the shares

of the companies that are private can’t be listed in public stock exchanges.
 Although it sounds like Private companies doesn’t have shares but on the opposite the

company poses share but these shares can’t be owned by anyone or traded. Still the shares in

private companies are traded through few number of people and it can’t be traded by all the mass

in the market. Although the two type of companies operates in the same way still the shares

aren’t trade in the same way, this major difference provide that the public company trade its

share through the market according to the rules and regulation of SCE, while the shares of the

private company are traded by small number of people who are normally the owners or new

investors who are join the board of the company. Usually in the private companies the capital is

secured from venture capitalists. As per Wikipedia Venture Capital is “is a type of private equity,

a form of financing that is provided by firms or funds to small, early-stage, emerging firms that

are deemed to have high growth potential, or which have demonstrated high growth (in terms of

number of employees, annual revenue, or both)”. Venture capitalists usually prefer to invest in

private companies since they will collect high-reward investments but collected high level of

risk. Still Private Companies can try and go into the public market if more fuds are required in

order to expand its type of business. That is why sometimes the Private companies goes into

(IPO) Initial public offering and provide shares to the masses market. And on the other hand a

public company can transform itself from public to private company with the private equity firm.

As Per Wikipedia: “Private equity firms are investment managers which invest in private equities

of many corporates by following various strategies like leveraged buyout, growth capital, venture

capital and many more. The thing is private equity firms are treated as financial sponsors and

take a minority position in the operating firm where they invest. Private equity firms are the

investors who are responsible to raise pools of capital or funds for equity contributions”.
 Difference Between Public and Private Company

All companies consider different operational attribute to acquire revenue and profit. But

still many different elements can be notice between private and public nature of company.

Elements of Differences Public Company Private Company

Definition This kind of company can sell This company only sell its

the shares that are registered shares to investors who are

in to the general public so it willing to become a part of

can acquire more money and the company

expenditure

Trade on This company trade its shares In this kind of a company the

on the stock exchanges with shares are only trade between

access to different users from different investors who are

around the globe able to have access to this

company by the honor or

partners

Regulation This company need to follow This company doesn’t have to

the rules and regulation that follow any rule and

are set by the SEC. regulation before it is able to

acquire 10 $ million capital

and possess 500 shareholders,

than it should follow SEC.

Advantage The major advantage of the The main advantage for the
 public company is that it is private company is that it

able to acquire capital by only need to answer to the

providing it shares to the honor or the partners but not

market. to any stockholders.

Size Usually a public company is The private traded company

considered more as a big is usually smaller than a

companies with high number public trade company but still

of employees they can have a big or smaller

number of employees.

Source of Funds The Sources of funds for this The private company collect

kind of company is derived funds from the investors or

from the selling and buying the Venture capitalists.

of the shares and bonds under

its name

Switching between Public and Private

Of course a company can switch between public and private, to do the best for business

sustainability. The Private company can move into public company by presenting an IPO which

is the initial public offering and the shares will be set in the market for the general public. While

on the other hand a public company will more to become a private company by restricting its

share to few number of investors. In order for a public company to do so it will hire a PE firm
that will purchase all the available outstanding shares in the market and then a request will be

sent to the SEC to remove the company from the stock exchange.

Why Public Companies Go Private

There is different reason why a public company can choose to go private. It isn’t an easy

move, the management can’t take it easy while doing this move, and different issues on the short

term and long term will be considered to be solved, and there are always a negative and positive

side for such a move.

Being a public company means that dealing with its shares from buying and selling is

easy and will attract different level of investors who want to have liquid assests. As per

Investopedia: “A liquid asset is an asset that can be converted into cash speedily,

with little impact to the price received in the open market. Liquid assets

include money market instruments and government bonds”. A company that is public

traded usually gain more reputation of being a massive company with healthy financial situation and on

the road of success.

Still there are different regulation and rules that need to be fulfilled for the public company to

operate alongside the financial reporting and corporate governance by laws that the company should

follow. This might be confusing enough to the senior management while trying to focus on the

operation and on the same time having the ability to grow and abiding by the regulation that are set.