University of Missouri Kansas City Impact of Private Equity Firm Acquisition Discussion

Explain the impact of private equity firm acquisition of manufacturing and retail firms. (For business Ethics class)

1 st post to respond to :

Organizations need investments in difficult situations and losses to overcome the challenges and continue their operations being profitable. Private equity firms are the source to get huge investments for businesses and organizations. Private equity makes a huge investment in a company to purchase most of its shares and sell it after few years by making the company more valuable to make a profit. This investment is in different forms such as growth capital or leveraged buyout according to the situation of the targeted company. Usually, this investment is in the form of leveraged buyout which is money borrowed from banks and other investors (Kaplan & Strömberg, 2009). However, there are positive as well as negative impacts of the private equity firm acquisition on other companies like manufacturing and retail firms. So, a company whether it is manufacturing or retail should consider these negative and positive impacts of private equity before working with it.

A manufacturing company can invest in making new products and enhance its profit by working with a private equity firm. Research shows that the acquired manufacturing companies by private equity increase their sales three times and make huge profits. Similarly, retail firms can enhance their sales by effective advertisement through investment from private equity. Huge investments can create new ways of success for companies and make them profitable in a short time. Manufacturing and retail companies can hire new employees and adopt innovative methods to improve their performance through investment from private equity firms (Davis et al., 2011). But there are some disadvantages for these companies acquired by private equity firms such as losing management control, risk of shares and ownership stake, and clash of interests. So, these companies must think of preventive measures to overcome these disadvantages and take calculated risks of working with private equity firms to enhance the profit and value of their companies

2nd post to respond to :

Impact of Private Equity Firm

Introduction:

To run and set up the business successfully, money plays a vital role. The first investment made by the owner for financing various activities and operations from time to time for selling anything for the customers is called the capital. To run the business efficiently without any financial issues, continuous income flow is significant. However, anytime because of a decrease in sales, companies might face some economic problems also, for overcoming those issues they might depend on outside sources.

Thus, one of those sources, like private equity firms, an essential objective of the firms was to make some profits but contributing financial assistance for weak organizations or companies. This type of firm will either acquire or give money on the interest; if they hold a more significant stake in a company, they might interfere in its financial decisions and managerial decisions. Usually, the companies will get the benefits when this firm holds the lesser stake. Still, when it has a more significant stake also trying to overpower the directors and managers, a company might get negatively impacted as the firms started to make some effective company-related decisions to acquire the maximum return on the investment, which might also begin to for redesigning the structure of an organization. Sometimes that also becomes challenging for employees to adjust to these new rules and end this situation as disputes and conflicts might arise among various stakeholder groups. Thus, we could say that the company could get some positive impact when these organizations hold the minimal stake. (Chen, J. 2020)