The (heterogenous) economic effects of private equity buyouts

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

No 10/2022, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

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: administrative data; business cycle; credit conditions; employment; private equity; productivity (search for similar items in EconPapers)
JEL-codes: D24 G24 G32 G34 J23 J63 L25 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-lab and nep-sbm
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https://www.econstor.eu/bitstream/10419/251587/1/1796390186.pdf (application/pdf)

Related works:
Working Paper: The (Heterogenous) Economic Effects of Private Equity Buyouts (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:102022

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