Privatization is not executed because it is in fashion. There is a proper set of requirements which needs to be present if this step has to be taken. Apart from that, this decision is taken after everything is examined by the board of directors. However, a more important thing is the decision taken by the government. If the government feels that an organization is not profitable, it would opt for privatization. Once, this decision is taken, the shares are opened for bids. The group which bids the highest and gets the maximum shares wins the ownership.
Why does the government take the step of privatization? The answer to this question is very simple. A public company is run by the government and all costs are covered by the national budget. Hence, the expenditure rises. If the organization is generating profits, government bodies do not have a problem in running the company. However, it is running in a loss, the government it would invite the leading organizations for buying the public company.
In the last two years, several leading public companies around the globe have been privatized. Due to recession, revenue percentages are falling and unemployment is increasing. Hence, governments are selling most high cost organizations to private owners. In most situations, high layoffs have been observed after a public company has been privatized.