Private Equity Approach to Public Markets
Combine deep diligence, concentrated bets, and active operational partnership
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 98%
This approach applies private-equity discipline without taking a company private. The investor follows a public company for months, conducts deep fundamental diligence, and uses experienced executives and industry networks to assess its competitive position, leadership, and opportunities. Because the resulting portfolio contains only a few investments, each position must clear a high conviction threshold. Work continues after capital is deployed: the investor advises management, helps improve operations and capital allocation, strengthens the company’s capital-markets narrative, recommends directors when useful, and supports strategic repositioning. The mechanism converts research and operator knowledge into active, behind-the-scenes partnership, with value measured through sustained improvements for customers, employees, and shareholders.
Origin
Doug Braunstein developed this approach at Hudson Executive Capital after three decades advising executives and building a network of experienced CEOs. Extracted from Masters in Business.
Core principles
- 01Investigate businesses more deeply than typical public-market investors
- 02Concentrate capital only where conviction is high
- 03Use experienced operators to test assumptions
- 04Create value through operational and strategic involvement
- 05Judge success over years rather than around a transaction
How to run it
- 1
Build a focused opportunity set
Identify small or mid-sized public companies where operational, financial, or strategic improvements could materially change shareholder value.
Pro tip Favor businesses where your network has genuine domain knowledge.
Watch out A low valuation alone does not establish an attractive opportunity.
- 2
Conduct extended diligence
Follow each candidate for several months and investigate its economics, competitive position, leadership, customers, and strategic alternatives.
Pro tip Use current and former operators to challenge the investment thesis.
Watch out Do not let public filings become the only source of evidence.
- 3
Make few high-conviction bets
Invest only when the evidence supports a durable advantage and a credible route to improvement. Keep the portfolio concentrated enough for meaningful involvement.
Pro tip Write down the value-creation thesis before investing.
Watch out Concentration magnifies the cost of weak diligence.
- 4
Partner with company leadership
Work constructively with management and the board on execution, mentoring, and governance, usually outside public view.
Pro tip Establish shared objectives before proposing interventions.
Watch out Public confrontation can make cooperation slower and less effective.
- 5
Improve the value drivers
Address operations, capital allocation, investor positioning, and long-term strategy as an integrated system.
Pro tip Prioritize changes that strengthen the underlying business rather than merely boosting the share price.
Watch out Financial engineering cannot replace operational progress.
- 6
Track long-term outcomes
Evaluate whether the company is delivering better results for customers, employees, and shareholders over time.
Pro tip Use operating milestones as well as valuation milestones.
Watch out Do not confuse a temporary market rally with thesis validation.
In the wild
Hudson invested after Cardtronics had completed large acquisitions, increased leverage, suffered deteriorating performance, and lost its largest customer. Braunstein’s team used months of diligence, banking expertise, and its executive network before working with the new CEO to change the company’s strategic focus. When the pandemic depressed the stock despite resilient operations, Hudson partnered with Apollo on a take-private offer, prompting a broader sale process.
→ Cardtronics attracted a superior strategic offer from NCR after operational and strategic repositioning.
Hudson invested after new CEO Christian Sewing took office. Rather than relying on a favorable banking environment, the thesis centered on management-led cultural, operational, and strategic changes that could restore profitability and generate excess capital.
→ Management executed its repositioning plan for roughly two years while the investment thesis became less contrarian.
Common mistakes
Buying before diligence is complete
A cheap stock can remain impaired when its competitive position, culture, or management cannot support recovery.
Confusing activism with publicity
Public pressure is not inherently valuable; Braunstein argues that consultative, behind-the-scenes engagement often produces results faster.
Spreading attention too widely
Too many positions prevent the investor from developing conviction and contributing meaningful operational help.
Is it for you?
Best for
It is best for patient investors with concentrated portfolios, domain expertise, and access to company leadership.
Not ideal for
It is not ideal for passive investors, short-term traders, or highly diversified funds unable to engage deeply.
From the transcript
“we only make three to five investments per year.”
“We're, you know, we're kind of roll up your sleeves kind of investors.”
“we try to take a private equity like approach to public market investing.”
From the episode
Doug Braunstein on Investment Banking (Podcast)
Doug Braunstein