Once a PE firm completes an acquisition of their intended target, how involved is PE running the day to day of the firm?
What management oversees all operations? Just trying to understand the job of private equity in regards to their portfolio companies. I heard that PE firms typically take board seats and if so, how does that work?
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The short answer is that a PE firm is not involved in the day to day running of the firm. However, because a PE firm engages in a buyout only when it sees potential for value creation, there may be operational changes firmwide that are designed and implemented by the PE firm in order to effect said value creation.
For example, if a PE firm invests in a restaurant group, it won't necessarily have its people manage daily operations like being maître d or cooking, but it may implement overarching policies on procurement or kitchen structure to reduce costs and make the operations leaner.
On a broader level, PE firms will also guide in higher-level strategies, such as where to expand into, etc. This is where their board seats come in handy as the director representatives from the PE firm can have more say in their votes on what the company should do and where it should go.
From what I understood PE firms mainly work on restructuring the firm and not too involved in the strategy. Is this correct?
Not necessarily. If a PE firm is able to provide added value to the firm by providing strategic advice, for example, expansion into a region where it has strong expertise or significant contacts that are useful in building out the business, then it would steer the company in that direction.
Restructuring usually works by trimming down the business to make it leaner and more efficient, but this is best supplemented by top-line growth through moving into new markets or product lines, or even re-positioning the company's products/services.
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