Why PE Firms are Restructuring (and Not Just Their Portfolio Companies)

Abstract

This article, based on a study of about 70 middle-market private equity firms, found that a majority either are making changes to the way they organize functions or are planning to make changes soon. While most general and limited partners correctly believe that organizational structure has a significant impact on investment returns and the amount of risk their firms can assume, they are unclear as to what structures would be optimal. This article examines the forces driving this desire for change and suggests a methodology for achieving the proper structure according to a firm’s history, culture, and goals.

TOPICS: Private equity, equity portfolio management, analysis of individual factors/risk premia, in portfolio management