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• Working Paper | HBS Working Paper Series | 2019

  The Economic Effects of Private Equity Buyouts

  Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner and Javier Miranda

  We examine thousands of U.S. private equity (PE) buyouts from 1980 to 2013, a period that saw huge swings in credit market tightness and GDP growth. Our results show striking, systematic differences in the real-side effects of PE buyouts, depending on buyout type and external conditions. Employment at target firms shrinks 13% over two years in buyouts of publicly listed firms but expands 13% in buyouts of privately held firms, both relative to contemporaneous outcomes at control firms. Labor productivity rises 8% at targets over two years post buyout (again, relative to controls), with large gains for both public-to-private and private-to-private buyouts. Target productivity gains are larger yet for deals executed amidst tight credit conditions. A post-buyout widening of credit spreads or slowdown in GDP growth lowers employment growth at targets and sharply curtails productivity gains in public-to-private and divisional buyouts. Average earnings per worker fall by 1.7% at target firms after buyouts, largely erasing a pre-buyout wage premium relative to controls. Wage effects are also heterogeneous. In these and other respects, the economic effects of private equity vary greatly by buyout type and with external conditions.

  Keywords: private equity buyouts; Impact; Private Equity; Economics; Employment; Performance Productivity; Wages;

  Citation:

  Davis, Steven J., John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner, and Javier Miranda. "The Economic Effects of Private Equity Buyouts." Harvard Business School Working Paper, No. 20-046, October 2019.  View Details

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• Case | HBS Case Collection | October 2019

  Hony Capital and Jushi Group

  Josh Lerner, Shai Bernstein and Ann Leamon

  Hony Capital, a multi-billion dollar private equity firm based in China, is investing in a subsidiary of Jushi Group, a Chinese company that is one of the world’s largest fiberglass producers. The specific project will build a plant in the United States. In this case, students consider the value Hony can provide to Jushi, and must also determine how Hony will eventually exit the transaction, given the complexity around its structure.

  Keywords: real estate; Investing; fundraising; manufacturing; Private Equity; Asset Management; Finance; Investment; Venture Capital; China; United States;

  Citation:

  Lerner, Josh, Shai Bernstein, and Ann Leamon. "Hony Capital and Jushi Group." Harvard Business School Case 820-040, October 2019.  View Details

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• Case | HBS Case Collection | March 2007 (Revised September 2019)

  Motilal Oswal Financial Services Ltd.: An IPO in India

  Felda Hardymon, Joshua Lerner and Ann Leamon

  The executives of Motilal Oswal Financial Services, Ltd., one of the largest brokerages in India, are considering an IPO on the Indian markets. The company recently received a small private equity investment from two global private equity firms, which it has not yet fully invested. Historically, the Indian markets have favored higher-revenue companies. Should Motilal Oswal go public now, to take advantage of the hot Indian market, or hold off and build its revenue for a higher valuation?

  Keywords: Private Equity; Initial Public Offering; Investment; Emerging Markets; Financial Services Industry; India;

  Citation:

  Hardymon, Felda, Joshua Lerner, and Ann Leamon. "Motilal Oswal Financial Services Ltd.: An IPO in India." Harvard Business School Case 807-095, March 2007. (Revised September 2019.)  View Details

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