We’ve given lots of attention to anti-private equity screeds from the SEIU, Brave New Films and just about everyone in Europe, so now it’s time for some balance. Well, not total balance, but just the other side of bias:
The Private Equity Council, a lobbying group for 11 of America’s largest buyout shops, recently sponsored a study focused on job creation/destruction at private equity portfolio companies. It found that PE-owned companies add jobs at a faster rate than do companies at-large. Who woulda thunk it?
The study’s sample included 42 companies bought between 2002 and 2007, with acquisition values of at least $250 million. This represents 60% of all such deals done during that time period, and was collected by asking participating firms to provide detailed employment data on their ten largest transactions. Each participating firm was a member of the PE Council, and included: Apollo Management, Bain Capital, Blackstone Group, Carlyle Group, KKR, Providence Equity Partners, Silver Lake Partners and TPG. Three other PE Council members – Apax Partners, Hellman & Friedman and THL Partners – did not participate.
Researchers found that the combined global workforce of this sample recorded 8.4% growth, while employment rose at 76% of the individual companies. They also examined a subset of U.S. employment, and found that it grew at a 13.3% clip, compared to 5.5% for typical private U.S. companies over that time period (net adjusted gain for PE-backed firms of 7.8%).
Not too shabby, although it is once again worth remembering who sponsored the study, and the self-selection of participating firms.
It will be interesting to see, therefore, how the PE Council responds to a new academic study being released in Davos this week, by Josh Lerner of HBS and Steven Davis of University of Chicago. A sneak peak last month suggested that, compared with competitors, PE portfolio companies generally eliminate more jobs, or add fewer jobs. It is still unclear where the data came from, but we should know soon…
You can download the entire PEC-sponsored study here: PEC_Jobs.pdf.
And here is a similarly-sunny report on Dutch jobs vis-a-vis private equity: NVP.doc