Barbarians at the Gate? Leveraged Buyouts, Private Equity and Jobs

Abstract

Unions, private equity practitioners and policy-makers are all concerned with the effect that private equity finance and LBOs (Leveraged Buyouts) have on employment. Unions are concerned with job destruction whilst practitioners argue they create jobs. Using a panel of 533 LBOs observed over the 1993-2004 period we find evidence that both private equity financed and non-private equity financed LBOs have higher levels of employment pre- and post-buyout when LBOs are exogenously determined, but they do not have significantly different levels of employment compared with non-LBOs when allowing for LBO endogeneity. The results: (1) demonstrate the importance of allowing for LBO endogeneity; (2) are not consistent with LBOs and private equity either creating or destroying jobs.

Keywords: Leveraged Buyout, private equity, labour demand

JEL Classification: G34, J23, L23