Abstract
This paper explores the case of Toys “R” Us in order to understand the strategy of private equity-backed firms. It is a first attempt to investigate the target firm’s strategy from a dynamic capability perspective. The paper shows that the acquired firm mobilizes resources after acquisition in order to improve its competitive strategy within the traditional business. The paper confirms that the concerns about leverage buyouts are exaggerated because the acquired firm mobilizes resources to generate long-term growth. Moreover, the paper discusses possible improvements of the corporate strategy implemented by private equity-backed firms. After acquisition, private equity management could help push the target firms into developing the resource potentialities in the direction of their diversification. Future quantitative researches could verify the results of this qualitative work on a larger sample.
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