How much do successful private equity buyouts really contribute to a company’s performance? Researchers Steven J Davis, John C Haltiwanger, Kyle Handley, Ron S Jarmin, Josh Lerner and Javier Miranda analysed data from 3,200 companies targeted for takeovers in a five-year period, both before and after they had been acquired, and found that, in fact, employment fell 3% in the two years after the buyout and 6% over a five-year period. The researchers also noted that the improvement in the firm’s performance after the acquisition was in part due to these job cuts. Though new jobs are definitely created as well, with fresh hiring carried out a year or two after the takeover, the net pay per worker dips sharply after a buyout. Who said firm-shopping was easy?
Title: Private Equity, Jobs, and Productivity.
Source: The National Bureau of Economic Research