The (Heterogeneous) Economic Effects of Private Equity Buyouts

Steven J. Davis (), John Haltiwanger (), Kyle Handley (), Ben Lipsius (), Josh Lerner () and Javier Miranda
Additional contact information
Steven J. Davis: Hoover Institution, Stanford University, Stanford, California 94305
John Haltiwanger: College of Behavioral and Social Sciences, University of Maryland at College Park, College Park, Maryland 20742
Kyle Handley: University of California San Diego, La Jolla, California 92093
Ben Lipsius: Independent Scholar, New York, New York 10002
Josh Lerner: Rock Center for Entrepreneurship, Harvard Business School, Boston, Massachusetts 02163

Management Science, 2025, vol. 71, issue 11, 9569-9587

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 12% over two years after buyouts of publicly listed firms—on average, and relative to control firms—but expands 15% after buyouts of privately held firms. Postbuyout productivity gains at target firms are large on average and much larger yet for deals executed amid tight credit conditions. A postbuyout tightening of credit conditions or slowing of gross domestic product growth curtails employment growth and intrafirm 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. We relate these findings to theories of private equity that highlight agency problems at portfolio firms and within the private equity industry itself.

Keywords: financial institutions; investment; industries; business services; organizational studies; personnel; productivity (search for similar items in EconPapers)
Date: 2025
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http://dx.doi.org/10.1287/mnsc.2021.03890 (application/pdf)

Related works:
Working Paper: The (heterogenous) economic effects of private equity buyouts (2022)
Working Paper: The (Heterogenous) Economic Effects of Private Equity Buyouts (2019)
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