Private Equity-Backed Firms’ Corporate Strategy: An Explorative Study from a Dynamic Capability Perspective

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.