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.
Stefan Obernberg, Erasmus University
Stefan Weik, University of St. Gallen
Xiang Yin, Tsinghua University