Rethinking target’s private equity process in turnaround situations

Abstract

Given the increasing role of PE investments in restructuring the trend of acquisitions, its process needs an organizational change in order to cope with crisis situations. Despite several papers have emphasized the important role of PE both in M&A transactions and in turnaround situations no research crosses these two aspects. This paper bridge this gap, proposing a rethinking of the target’s PE Process in turnaround situations creating value for the target and preparing it for the takeover. This purpose is achieved throughout a literature review and the description of a new PE process throughout the paradigmatic case study of the sport company Brown Ltd. Finally corrective actions are implemented. Results show how a turnaround situation needs a new PE process, developed in 3 main phases (crisis analysis, recover and development) through which it creates value for the target. Main limits consist in the application of the new PE process to a single case study and the lack of an empirical support able to generalize it. The findings help identify drawbacks and set an agenda for future work. This new process could be tested also on other industries and firms of different size, providing a practical adaptation of the PE process in crisis situations and adopted by consulting agencies after testing also its effects in the long term.