The Role of Private Equity in Restructuring Distressed Companies

Introduction
Context and Importance of study
Overview of distressed companies and the role of PE
There has been a rise in the number of organizations recognized as distressed companies. These
are companies that face financial distress that has become increasingly common in today’s time.
Financial distress impacts the company first, and gradually affects the stakeholder and the
society. It is recognized when a company takes load and is not able to return the principle and
interest amount. (Holder-Webb & Cohen, 2007).
Before a company faces the default stage, there are prominent signs of Financial distress. The
signs include early impairment, decreasing performance, failure in operations and unable to meet
the financial needs of the organization. Researchers have found that profitability and liquidity of
money are two most significant factors related to financial distress. (Bandyopadhyay, 2022). The
companies facing distress are usually filing for bankruptcy and they are removed from the stock
exchange. In such cases, the companies lastly pay the shareholders for their investments and
there are higher chances that the company cant even pay back to their creditors. (Holder-Webb &
Cohen, 2007).
https://ir.iba.edu.pk/cgi/viewcontent.cgi?article=1213&context=businessreview
https://www.researchgate.net/publication/
372530566_Identification_of_the_Financially_Distressed_Firms_through_Enclosure_of_Corpor
ate_Governance_Information_into_the_Altman_Z-Score
In today’s world, Private Equity (PE) firms have been quite popular in taking over UK
companies to support them financially. There has been a growing number of companies owned
by PE firms today. The Private Equity firms provide various types of investments including
buying security for companies facing financial distress. PE firms invest in companies that are not
publically listed. The key role played by PE firms is to turnaround distressed companies and
generate increasing profit for them.
Significance of restructuring distressed company
The restructuring of a distressed company can result in significant outcomes, favourable for it
towards better growth. One of the primary reasons restructuring is significant for these
companies is the potential for higher returns. By increasing investments, there are chances of
improvement in the performance, and hence increases the value of investment. It can also help
gain diversification benefits, specially for companies that are loojign to increase their portfolio
assets. Most importantly, PE firms introduce new strategies towards management of employees
that improve performance. By introducing new management strategies, the employees can
achieve job satisfaction leading to better productivity. Finally, the economic potential including
sales, profit margins, costs all can be improved with the restricting. Altogether, it is important to
bring out restructuring strategies in distressed companies, that allow them to improve the
outcomes.
https://www.acquire.fi/blog/exploring-the-benefits-of-distressed-private-equity-
investments#:~:text=Private%20equity%20firms%20take%20an%20active%20role%20in
%20managing%20distressed,ability%20to%20influence%20the%20outcome.
Key questions the thesis aims to address
This thesis focuses on investigating the role of Private Equity towards restructuring Distressed
companies. Following are the questions this thesis aims to answer:
1) What is the role of PE firms towards distressed companies?
2) How PE firms restructure Distressed companies going bankrupt?
3) What factors influence the success of strategies implemented by PE firms towards a
distress company?
4) What factors influence the failure of strategies implemented by PE firms towards a
distress company?
5) Does PE firms support provide more value or harm to Distressed companies?

2. Literature Review (1000 words)

2.1 Definition and Identification of Distressed Companies – 300 words
Common indicators and ratios
Financial distress has been identified by researchers in the corporate sector since late 1960s.
Financial analysts and researchers make use of financial ratios to measure and evaluate this
distress. The most significant ratios used for this purpose include profitibality, solvency and
liquidity of cash, along with efficient management to design and implement the policies as well
as investments. (Mohammed, 1997). These ratios play a significant role in presenting the
performance of a firm in the current, past and future times. Researcher groups like Mohammad et
al (2009) find these ratios crucial for conducting financial analysis and also for evaluating
company’ performance (Mahmood et al., 2009).
A study was conducted on finding the ways these ratios investigate the situation of distressed
companies. The concentration of this study was on the liquidity ration and the long term debts
ability to pay. For assessing credit facility’s status, liquidity ratios are used. The ratio indicates
the ability as well as meets the short term needs. Another important indicator is current ratio,
which indicates the financial liquidity. It measures if a company has enough cash to pay their
debts in the coming year. And it evaluates its current assets with current liabilities. For reducing
risk consumption, higher current ratio is preferred by short term creditors. On the other hand,
shareholders prefer low current ratios as it allows the company’s assets to increase. For example,
high current ratio is preferred in cyclical industries to maintain enough cash to be able to pay off
debts (Ali, 2008; Mahmood et al., 2009). Next, Leverage ratio measures if the company is able to
meet its financial requirements. Debt ratio is categorized as the ratio evaluating the total debt
with total assets. This shows the value of a firm’s assets that are bought through the debt.
2.2 Role and Strategies of Private Equity in Restructuring 350 words
Overview of PE involvement in distressed firms
Private Equity (PE) firms focus on helping financially distressed companies to restructure.
Hotchkiss, Smitch and Stromberg (2021) conducted a study to evaluate the role of PE firms to
solve the issue of financial distress among companies. Most importantly, the study focused on
understanding the relationship between Private Equity support, financial distress and bankruptcy.
For collecting data, the study choose firms with rates lower than the Moody’s investment grade
during 1997 to 2011. Their chances of default were compared to companies that were facing
financial distress and had gained support by PE Firms. The study’s results showed that PE
supported companies had higher probability of leading to default compared to others. But the
results were not statisitically significant and there were chances of other factors influencing the
relationship.
PE strategies: buyouts, turnarounds, operational Improvements
Buyouts
There are several strategies and tools used by Private Equity (PE) firms to support financially
distress companies. One of the efficient tools used to improve organizational processes,
decreasing working personnels and also the unit costs in a company includes PE supported
buyouts (Harris et al. 2005). The traditional agency theory has studied Buyouts in depth. The
buyouts fulfills managers incentives by following high leverage, providing ownership and
maintaining good governance. And the principals in this case are the equity supported investors
(Cotter and Peck 2001; Jensen 1989). It provides efficiency to firms, along with providing
innovation in strategy and growth in entrepreneurial strategies (Meuleman et al. 2009; Wright,
Hoskisson, Busenitz, and Dial
2000).https://eprints.whiterose.ac.uk/159507/3/PEFirmsRoleAsAgentandtheresolutionofFinancia
lDistressinBuyouts_Manuscript.pdf
Turnarounds
The purpose of this paper is to provide a comprehensive overview of turn-
9
around financing in Italy , meaning operations regarding distressed or
troubled companies, carried out by professional private equity investors.
Sectorial data show that total investment in turnarounds is on the rise but
still amounts to less then 5% of the Italian private equity market. Greater
attention, however, seems to be paid by professionals and the media be-
cause of the great economic returns expected
The purpose of this paper is to provide a comprehensive overview of turn-
9
around financing in Italy , meaning operations regarding distressed or
troubled companies, carried out by professional private equity investors.
Sectorial data show that total investment in turnarounds is on the rise but
still amounts to less then 5% of the Italian private equity market. Greater
attention, however, seems to be paid by professionals and the media be-
cause of the great economic returns expected
The purpose of this paper is to provide a comprehensive overview of turn-
9
around financing in Italy , meaning operations regarding distressed or
troubled companies, carried out by professional private equity investors.
Sectorial data show that total investment in turnarounds is on the rise but
still amounts to less then 5% of the Italian private equity market. Greater
attention, however, seems to be paid by professionals and the media be-
cause of the great economic returns expected
Alessandro Danovi (2010) presented research in his paper, outlining the Turnaround financing in
Italy. This is a technique used by private equity firms and investors to support distressed
companies. Data shows that investments towards turnarounds have increased but its value is less
than 5 percent of the PE Italian market. But media and economic professionals are keen towards
this strategy as there are more returns expected.
https://www.researchgate.net/publication/
263166835_Private_equity_for_distressed_companies_in_Italy
2.3. Impact of Private Equity on Firm Performance 350 words
Empirical evidence of PE impact on post-restructuring performance
Private Equity firms have made significance presence in post structuring distressed companies.
Barry (1990) has empirically investigated the role of private equity to monitor companies. The
research found that PE investors focus on specific industries, holding their equity in invested
firms and manage these companies through their expertise and knowledge of the industry. The
PE investors hold the equity and continue their responsibility to improve the governance
structure as well as the performance of the company.
https://www.researchgate.net/publication/
338438743_The_Impact_of_Private_Equity_on_Corporate_Performance_An_Empirical_Resear
ch_of_the_Listed_Companies_on_GEM
can add more
Comparative studies on PE-backed vs non-PE-backed restructuring
Several researched literature has investigated if PE supported firms are better than non PE
supported firms. But it is difficult to conclude if companies that have their performance
improved through PE capital is better than other types of financing, given factors like growth and
innovation are involved. Meles, Monferra and Verdoliva (2014) supported the claim that PE
supported companies have higher returns compared to non supported companies. Similarly,
Lahmann, Stranz and Velamuri (2017) also emphasized that PE firms provide more strength to
the companies they support. Meles et al. (2014) conducted a study on 118 PE supported Italian
companies. They found direct impact of PE capital on the performance of supported company,
influenced by the type of PE, duration of investment, nature of PE and the exit strategy. The
result of this study indicated that PE support companies performed better and hence a positive
relationship was found between PE investments and a company’s performance. Salerno (2019)
discusses the positive relationship between PE firm’s support and the supported company’s
performance. His study focused on gathering data from 553 European SME’s that were
supported by PE companies. The study’s results found that PE supported family SMEs
performed better compared to non-family PE supported SMEs.
https://www.researchgate.net/publication/
366200854_Private_Equity_Financing_and_Financial_Performance_A_Critical_Review_of
_the_Literature
Tykova and Borell (2012) also conducted research to compare PE supported and non PE
supported company’s bankruptcy rates and financial stress for private and public firms in Europe.
The research found PE supported companies faced more distress risk post buyout in comparison
to non backed companies. The comparison was made using Altman’s Z score calculations. But
PE supported companies did not have higher rate of bankruptcy compared to non supported
companies.
https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=3926&context=cmc_theses

3. Methodology (800 words)

3.1. Research Design 200 words
The type of research methodology is the most crucial part of a research that helps to decide the
method used to gather and further evaluate data for the chosen topic. Qualitative and
Quantitative approaches are broadly used for data collection methods. Qualitative approach, also
known as exploratory method, investigated the patterns of opinions and ideas compared to the
Quantitative approach which makes use of numerical data that presents information in the form
of statistics. The qualitative method focuses on what, how and why questions to solve the
research. And the Quantitative investigates the how and why questions (Barnham,2015)
https://www.researchgate.net/publication/
349003480_Understanding_quantitative_and_qualitative_research_methods_A_theoretical_pers
pective_for_young_researchers
Justification for chosen methodology
Specific to this research, qualititative research methodology is used for gathering and evaluating
the data to find the role of Private Equity firms on distressing company’s restructuring. This
research paper makes use of Casestudy to investigate information on the variables involved. Case
study is a tool that makes use of report of past studies to explore the relationship between
complex variables. It is used specifically to provide an indepth investigation. It allows the
researcher to closely study the specific context of the research topic. The casestudies help select
specific geographical areas or individuals in a setting to study the topic.
https://core.ac.uk/download/pdf/11784113.pdf
The reason to choose this qualitative method is that it is a tool specifically used for social
sciences topics. Researchers prefer its usage because of the growing limitations of quantitative
methods failing to provide indepth explanation to behavioural relationships.

3.2. Data Analysis 500 words

Analytical tools and techniques (e.g., financial ratios, innovation metrics).
Data analysis within financial topics requires gathering and transforming to present financial data
with the outcome in the form of significant insights related to the relationships studied. Data
analysis is a significant process, that improves the final results on the topic. To conduct data
analysis in this case, financial statements need to be used. These are the records that provide
facts related to finnaical activities and the business position in the specific timeframe.
https://www.researchgate.net/publication/377762220_Data_Analysis_in_Finance_Management
Specific to the topic under discussion, the data analysis for this research will focus on financial
ratios to evaluate the difference among different financial scenarios. The comparison of
Framework for evaluating performance and innovation outcomes

4. Case Studies
4.1. Case Study 1: Successful PE Restructuring
Detailed analysis of a successful PE restructuring case
The casestudy of Marazzi presents the previously family owned company that was searching for
a financial structure and partnership to gain growth from being a European company to a world
leader. Marazzi’s first PE involvement was in 2004. The Marazzi group was founded in 1930s. It
is recognized as a prominent Italian multinational company in the ceramic tiles and sanitary
industry. Permira and the PE partners had the aim to make the company reach stock markets.
Permira is a private Equity investor known at international level. It has made 280 investments
from 1985 to 2007. The other investor, Private Equity Partners S.p.A is a merchant bank in Italy.
They had a 20 year experience in Italy and hence were leaders in the country in PE sector.
In 2004, Permira and the PE Partners made a new company, Riaz and bought 33% of the capital
from the Marazzi family. The aim for this action was for the company to go public in the next 3
to 5 years. In 2006, Marazzi went public and both the PEs made preparations for future planning.
In 2008, the compant was delisted to expand it further. The investors put in more money and
created a joint enterprise by the name Fintiles. And in July 2008, Fintiles launched public tender.
With the support of PE towards Marazzi, there have been significant financial turnarounds,
which are visible in the company’s financial data. The data from 2004 to 2007 is available to
show, as for the remaining years the company was delisted. It shows that during this period, the
company experienced growth. The company’s net profit increased to € 52.8 million in 2005 from
€ 14.9 million in 2004. Similarly, the sales increased by 19.8%, EBITDA increased by 50.5%.
But the net financial debts increased from €263 million to €281.2 million. The next year, 2006
the company performed the best with new records in financial data being set. Due to the support
of PE towards Marazzi, the most prominent result was the restructuring of the organization and
the managerial structure aswell. Under this reorganization, two key strategies were implemented
including the Managerialization of structure and adoption of Corporate Governance.
Factors contributing to success
This Marazzi Gorup case shows a positive economic outcome after the supportive PE
investments. Through these funds, the internationally acclaimed company gained expansion and
partnership. There are three key reasons that led to the success of company’s PE restructuring.
Firstly, the Marazzi leaders played a significant role as they choose the PE option for their
growth’s support, choose the private equity funds that build financial strategy along with focus
on industrial strategy. And they have the specific industrial objectives with long term goals of
growth. Secondly, the characteristics of the company are supportive aswell. Marazzi is a market
leader and is technologically strong with significant features as a family based company. It has
strong economic and industrial strength but also has traditional structure, that allowed future
growth. This became the attraction for PE firms. And finally, the distinctive operations of the
company that were developed without any debt.
file:///C:/Users/Kashaf%20Shahzad/AppData/Roaming/Microsoft/Windows/Network
%20Shortcuts/PrivateEquityFinalReport.pdf
4.2. Case Study 2: Unsuccessful PE Restructuring
Analysis of a less successful case.
One of the most known cases of an unsuccessful PE investment was the Buyout of Toys R Us
that involved KKR, Vornado Realty Trust and Bain Capital in 2005. Toys R Us is an American
company that sells clothes, toys and newborn products . It has a supermarket strategy to provide
children based products. The company transformed significantly in 1990s, by introducing an
online store in the end of the decade.
https://ethesisarchive.library.tu.ac.th/thesis/2017/TU_2017_5902042273_8731_6848.pdf
The investors involved in this case had their own importance. Bain Capital is a reknowned
Private investment firm that provides capital through Private Equity, assets, venture capital along
with management services. Since the beginning of its operations in 1984, the company has
catered to more than 230 companies include famous companies like Dollarama, Burger Kind,
Staples etc. KKR is another company that was associated with this case. It is one of the most
experienced PE firms with expertise in management buyouts. It has made significant 11
investments in retail industry across Europe and North America. Lastly, the Vornado Realty
Trust, a real estate company had 735 properties with their own value of $19 billion. The
company manages office, retail as well as showroom properties in US. They have significant
experience in the real estate sector.
https://www.sec.gov/Archives/edgar/data/899689/000110465905033479/a05-
13329_1ex99d1.htm
Challenges and what went wrong
The PE firms made use of leverage to fund a deal of $6.6 billion. However the investors could
not manage to make it successful for Toys R Us. The company filed for bankruptcy in 2017 and
their assets were liquidated in 2018. There were several reasons for the failure of Toys R Us
despite getting the support of PE firm. Firstly the company lacked cash flow. In recent times, the
entertainment industry for children has grown drastically, and hence there are more types of toys.
With growing competition, it became difficult for Toys R Us to keep up in the US and Global
market. And hence they were not able to keep up with the cash flow through revenue. In 2013,
the company ended IPO, stating that the environment was not well. The explanation was that
they did not have enough cash flow for this operation. Post acquisition the sales of traditional
toys were negative, but the sales of video games had a positive growth rate. Due to growing
competition, the company started losing its market share. And during this time, the expenditure
began to grow increasing the pressure on the company. Another incident that affected the growth
and success of Toys R Us occurred in 2000 when the company began a 10 year deal with
Amazon. They decided to co-brand their online store with Amazon to handle orders and
customer service. Due to this deal, the company relied on Amazon for order fulfillment and
customer service. Altogether, the company was not able to achieve significant growth since PE
firms introduction of LBO.
file:///C:/Users/Kashaf%20Shahzad/AppData/Roaming/Microsoft/Windows/Network
%20Shortcuts/125973768.pdf
4.3. Comparative Analysis
Key differences and lessons learned from both cases.
Both the cases of Toys R Us and Marazzi Group under study have key differences that led to the
varied results despite the involvement of PE firms for their restructuring. The differences are
recognized across the companys’ own characteristics, the external environment specific to the
market conditions and also the strategies implemented by the PE firms.
Marazzi company is an international company with a significant presence in the ceramic tiles and
sanitary industry. The company’s global reach has resulted in a significant market share across
Italy (12%), France (10%), Russia (8%) and US (10%). The tile market is not same around the
world, but has varoious regional markets. It is segmented into commodity, mid range and top
level. The most significant difference between the cases is using debt Leverage as a strategy to
restructure the company. Marazzi and its PE firms decided to not use debt leverage. During debt
leverage the cash flow of the firm is used for amortization and interest, and would result in
shorateg of cash flow.
On the other hand, Toys R Us company faced the biggest bankruptcy in the retail sector in the
history of USA. The company had gained a significant presence in the global market, quite
similar to Marazzi’s case as shared above. But the most significant aspect in this case is the
growing online competitors, Amazon, Walmart and Target. Thw groign competition along with
the decision to take debt from a buyout in 2005 became the reason the company ran out of cash
flow. The Toys R Us case results shared lessons that it was not advised for the company to use
Leveraged BuyOut (LBO). Without this strategy the company would have achieved growth, even
if they had poor performance they would have survived. Without LBO, the company would have
slowly achieved market share in the industry. The most crucial reasons for the failure of the
company despite the involvement of PE firm for support, was the deicison of using LBO.
The Marazzi group had a supportive market environment and comparatively less competition
that went in favour of PE firm’s strategies. In July 2008, the market environment showed slow
Western economies. This started to impact the building raw material sector. But as the company
was a market leader with a good grasp on geographic diversification, they remained the leading
and maintained the market share despite competition. The key strategy introduced by the PE
firms was the managerial structure involving Managerialzation and Croporate Governance.
Basicallt rhe shift was from the traditional, centralized management to a five business units
focused on the geographical areas that the company was based in.
5. Discussion (800 words) 400 words each
5.1. Key Findings
Summary of insights from literature review and case studies.
The key findings from this research are gathering from the analysis conducted under literature
review and case studies. The literature review presents the overview of past researches on the
topic being investigated. It forms an insight on the researches, finding the path towards the facts
that led to the topic of research. Along with this, the case studies provide real scenarios of
Businesses with indepth detailed related to their internal and external factors that influence
business strategies. It explores the problem in real life setting, and finds the outcome the
company faced.
The literature review presented the ways Private Equity (PE) firms restructured the company.
These include turnaround investments, debt restructuring, liquidation of assets, finance rescuinf
and Buyouts. Each of these are aligned to achieve better financial and managerial outcomes for
the company. PE firms are focused towards taking over the ownership of the distress company,
and making changes through adding more funds, changing managerial roles, changing the debt
burden, changing operations and providing good governance. The literature also found the
impact of PE firms on the company’s performance. Empirial evidence found PE forms made use
of their expertise and knowledge to make significant changes that does make changes, negative
or positive depending on the case. A comparison between studies was made between PE
supported and non supported restructuring of distressed companies.
The two case studies investigated for this research were about Marazzi Group and Toys R Us.
The Marazzi case study was to present the successful outcome of PE firm’s restructuring of a
distressed company. Marazzi is a family owned company based in Italy that sells ceramic tiles
and sanitary ware products. The company has managed to built a strong presence in the global
industry.The company was helped by PE investors including Permira and Private Equity Partners S.p.A.
Both of these PE investors are successful and have full experience in the industry. In 2004, the PE
investors formed a new company by the name Riaz and bought 33% of Marazzi. The strategies
implemented by these investors led to financial turnarounds for the company. The net profit, sales,
EBITDA all increased exponentially over the years. The two key strategies that made Marazzi to achieve
this result include Managerialization and corporate governance.

Toys R Us case study was to present the failed outcome of PE firm’s restructuring of a distressed
company. Toys R Us is an American company known for selling children toys, cltohes and newborn
products. KKR, Vornado Realty Trust and Bain Capital were the PE firms that supported Toys R Us. Each of
these PE firms had strong presence in the market. The issues associated with this case was the use of
leverage to fund the deal. The company had deteriorating operations and sales due to increasing
competition in the market. Their competitors including Walmart, Amazon and Target had introduced
video games, as there has been a growing demand for it among children as a source of entertainment.
Hence as a result, the company and the PE investors failed to save Toys R Us. The impact in this case is
the lack of cash flow for the company, and with allowing leverage Buyout, the company faced more
complications leading to direct bankruptcy.

Impact of PE on distressed companies’ recovery.

With the help of results gained from literature review and case study, the impact of Private
Equity on Distressed companies is found. Marazzi company, as a family owned company was
looking for a new type of partnership and with financial structure leading them to become world
leaders in their market. They choose Permira and Private Equity Parners so the company could
be on the stock market and also develop new markets around the world. And this is the result
they achieved, as after having PE firms on board, Marazzi acquired new markets quickly. At the
beginning of the reconstruction, the company was owned by the third generation of the Marazzi
family. But the investors introduced Managerialization for the company. The investment was
made towards globalizing the company. Even though the company had a strong presence as a
leader in the global market, their managerial strategies were traditional. Through
Managerialization, the PE firm wanted to modify the structure by grouping in five business units
on the basis of geography. As a result of these steps, the beneficiary increased from 51 to 76
administrators and employees. And the corporate Governance was incorporated to bring it to the
stock market. The financial data shows a significant increase in EBITDA, Net profit and the
margins on the revenue. After the company was delisted in 2008, the company improved its
leadership position in the market and also was ahead of its competitors, with increasing share.
Altogether, the PE firm’s involvement and support resulted in Marazzi to gain success in the
world market.
On the other hand, Toys R Us working with PE firms did not result in favour of the company.
The company before joining hands with PE firms was not achieving any growth. Toys R Us was
facing lack of cashflow issue. The company tried to improvise their instore events but the cash
drains did not allow it to achieve more. The strategy of Leverage Buyouts was a mismatch
strategy with their kind of product and the situation in which the company was stuck in. And
along with that, their buyers had several other options with more easier access. After LBO, the
company’s downward spiral towards bankruptcy was unstoppable. And hence, the results show
that LBO was a bad decision for the company.
6. Conclusion (500 words)
6.1. Summary of Research
Conclusively, the research aimed to find the role of private equity towards restructuring
distressed companies. It outlines the way of PE firms supports distressed companies. This is
through focusing on the strategies the PE firms implement to resolve the issue of becoming
bankrupt as a financially distressed company. The study also investigated the factors influencing
the success as well as the failures against these strategies. And finally, it presents if PE firms
support leads to adding more value or harm to distressed companies. The results are evaluated
using thedata gathered through literature review and case studies. They key findings from the
study is that the PE firms were supportive towards the distressed companies through various
methods including turnaround investments, buyouts and debt restructuring. The factors
influencing success and failure against the strategies implemented include the internal structure
of the organization, their managerial structure, operations, cashflows, number of competitors,
position in the global market and product/service portfolio with the increasing varied demands.
6.2. Theoretical Implications
The results of this study show that the internal and external factors of a distressing company
influence the result of restructuring a financially distressed company. The most important result
is the importance of cashflow maintainence to stay away from being bankrupt. This is a
significant result that aligns with the financial theories. Along with this, theories present that
growing opportunities in the external environment can be a source of threat for a company. For
this research, several external factors like growing competition, increasingly changing demands
and debts have been recognized.
The findings even though formed on the basis of secondary data collected through research
papers, it can help contribute towards finance and restructuring at corporate level. This analysis
predicts the way PE firms’ strataegies can be influenced by several factors. Hence it is critical to
identify these factors when working with a company.
6.3. Practical Implications
On the basis of results from this study, it is evident that PE firms need to focus on understanding
the internal and external environment of the distressed company before joining with any
company or forming strategies for them to improve their current status. The PE firms need to
evaluate the financial statements of company, to understand the figures and ratios. The managers
and the executives of the distressed companies need to study which strategy will align with their
current situation. Policy makers should keep in mind that the new strategy should be developed
keeping in mind the interest of all stakeholders involved.
6.4. Limitations
There are certain limitation associated with this study. As the study involves qualitative research
methodology for data collection and analysis, this process becomes more subjective. It does not
provide the statistical and objective results that can be presented in the form of graphs and tables
to understand the relationship between variables involved. The use of case study comparison also
is a limitation, as it is complicated to choose from a vast variety of cases available online.
Along with this there are certain biases involved in the research aswell. The research also has a
chance of reflexivity bias, which refers to the influence of researcher’s experiences nad beliefs
on the process and the validity of results. The choice of casestudy from the researcher also has
chance of bias.
6.5. Future Research Directions
For future research on similar topics, the company can conduct quantitative research involving
data collection tools like questionnaires or surveys. Or even conducting interviews of PE
investors and distress company owners. This will include the key stakeholder’s opinions, but
with more verification as the involved party will provide information. The primary data sources
are more reliable and authentic for research purpose, compared to secondary data. Along with
this, the future researches can evaluate the issues PE firms face while choosing strategies for the
firms, as that is a missing piece for this research. The role of technology, either missing or ready
to be explored can be investigated by researchers aswell.