Public Companies vs PE Backed Companies

The table below summarises the typical differences between publicly traded companies and those backed by private equity

Public companies	Private Equity-backed companies
Large number of small shareholders	Small number of large shareholders
Most shareholders have little or no operational input	Private Equity investors often on the board and involved operationally
Shareholders may have different agendas	Shareholders usually have the same agenda
Difficult for management to have a meaningful economic interest in the company	Management normally very highly incentivised - and the incentives are aligned with the interests of other shareholders
Public companies often concentrate on short-term earnings figures - can make it hard to take tough decisions if it hits earnings	Shareholders not concerned about taking tough decisions if that is the optimal strategy
Need to seek shareholder approval for large transactions - costly, slow and time consuming	Very quick decision making process means companies can move swiftly and keep costs down
Tend not to use much leverage - suboptimal WACC?	Happy to employ large amounts of leverage - probably closer to optimal capital structure
Difficult for shareholders to change management	Very easy to effect management change
Increasing regulation and disclosure requirements	Less regulation and little disclosure
Public companies losing the most talented managers to private companies	Potential high rewards tend to attract very talented individuals to both Private Equity and Private Equity-backed companies