Private Equity and the Organization of Firms
Type
working paper
Date Issued
2026
Author(s)
Abstract
We study how private equity (PE) buyouts reshape firms' internal organization. Combining data on over 10,000 U.S. PE buyouts with resume histories of more than five million employees, we track changes in hierarchies, control spans, and functional structure. Contrary to the widely cited view that PE streamlines and flattens organizations, we find that hierarchies deepen and control spans narrow. Administrative and coordination-intensive functions expand relative to product-related functions. Executive teams grow and become more specialized. These organizational changes persist after PE exits. Overall, the evidence suggests that PE investors build organization capital by improving coordination and decision-making within firms.
Language
English (United States)
HSG Classification
contribution to scientific community
Refereed
No
Official URL
Subject(s)
Division(s)