A company bought by a private equity firm will shed roughly 1 percent of its
payroll, according to a study released at the World Economic Forum in Davos,
Switzerland.
“The Global Economic Impact of Private Equity” examined U.S. private equity
transactions from 1980 through 2005.
After a buyout is completed, the study found, an acquired company cuts 7
percent of its workforce in the first two years.
At the same time, however, companies that are taken private usually add new
positions in new locations at a 6 percent clip, making for a 1 percent total
loss of jobs.
And after a company is under private equity ownership for four or five years,
the growth of its workforce becomes similar to that of its publicly traded
counterparts, the study found.
The research, which was led by Josh Lerner, professor at Harvard Business
School, and Steven J. Davis, professor at the University of Chicago’s Graduate
School of Business, was commissioned last year to measure the impact of private
equity on employment.
The study also said that a company will cut, on average, 4 percent or more of
its workforce as it tries to prepare for a sale.
Filed by Aaron Siegel of Investment News, a sister publication of Workforce
Management. To comment, e-mail editors@workforce.com.
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