A recent Pitchbook study shows the number of active private equity (PE) firms increased 143 percent globally from 2000 to 2014. And they’re doing well: PE companies nearly doubled the performance of public companies over a 10-year period at 11.8 percent vs. 6.8 percent, respectively. That’s according to a 2016 report by The American Investment Council.
As a former CEO of two public companies, one of my main goals was to work with my team to deliver a consistently high total shareholder return. One way I did that was to learn from others – including PE firms.
While many people believe PE firms attract the best and brightest leaders, my observation (and my own experience) proves that public companies also have top talent. So, what’s different?
“Public companies that apply the ‘offense’ strategies from PE firms will win in the marketplace, optimizing total shareholder returns.”
In public companies, the leadership team and board are aligned to not make a mistake and generate average returns, while PE firms are tightly aligned to generate exceptional returns. In other words, public companies play defense while PE firms play offense. The good news is that public companies can play offense too. Here’s how:
Four Ways Public Companies Can Play Offense
The key take-away: Public companies that apply the “offense” strategies from PE firms will win in the marketplace, optimizing total shareholder returns. Certainly, that has been my experience.
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