Ducati and Investindustrial: Racing out the pits and over the finish line Case Solution

On the other hand, TPG follows a contrarian philosophy and invests in those challenging companies that normal investors are moving away from. A contrarian investor like TPG creates value by making unconventional investments in undervalued companies.

2. What are the pitfalls of a private equity firm managing a publicly traded company? From the perspective of a PE firm, what are the advantages of taking a publicly traded company private?

Investment in a publicly traded company by a private equity firm has many advantages as well as disadvantages. Such investments are particularly attractive in control restricted environment. Moreover, private investors such as Warren Buffet invest in public companies because it enables them to purchase shares at a discount from the market price since such an investment does not increase the share price directly as an open market equity transaction would. However, the existing shareholders criticize such investments because they are dilutive and destroy the value of existing shareholders. Moreover, taking a public company private has various advantages. For example, decrease in required transparency and decrease in regulatory filings and reports. Moreover, since there are lesser number of stakeholders to please, the management can focus on core business rather than mundane reports and meetings with shareholders.