Publications
Publications
- 2019
- HBS Working Paper Series
The (Heterogenous) Economic Effects of Private Equity Buyouts
By: Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner and Javier Miranda
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary
tremendously with macroeconomic and credit conditions, across private equity groups, and by
type of buyout. We reach this conclusion by examining the most extensive database of U.S.
buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and
millions of control firms. Employment shrinks 13% over two years after buyouts of publicly
listed firms – on average, and relative to control firms – but expands 13% after buyouts of
privately held firms. Post-buyout productivity gains at target firms are large on average and much
larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit
conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation
at target firms. We also show that buyout effects differ across the private equity groups that
sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in
deal flow at the group level brings lower employment growth at target firms.
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 (Heterogenous) Economic Effects of Private Equity Buyouts." Harvard Business School Working Paper, No. 20-046, October 2019. (Revised July 2021. NBER Working Paper 26371.)