Private Equity Takeovers and Employment in the UK: Some Empirical Evidence

17 Pages Posted: 10 May 2011

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Noel O'Sullivan

Loughborough University - School of Business and Economics

Geoff Wood

University of Essex

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2011

Abstract

Manuscript Type: Empirical.

Research Issue: This study investigates the employment consequences of private equity acquisitions, in particular institutional buyouts (IBOs), in the UK. It involves a pre- and post-acquisition analysis of employment and performance characteristics for a sample of acquired firms and a matched sample of non-acquired firms.

Research Findings: There is a significant decrease in employment in acquired firms in the year immediately after the completion of the IBO compared with non-acquired firms. Further analysis fails to identify any parallel or subsequent increase in firm productivity or profitability. This evidence suggests that the observed downsizing has not been effective either in disciplining staff or imparting a clearer focus to activities.

Academic Implications: The results of this study add to our understanding of the employment effects of private equity acquisitions, especially IBOs. Two important theoretical issues emerge. The first is a need to conceptualize skills and human capabilities on a collective dimension, specific to a particular organizational setting, and the extent to which they contribute to the organization's performance. The second is the importance of understanding managers as operating in particular social settings, making subjective choices based on their specific knowledge and experiences.

Practitioner Implications: The main practitioner implication of our study is that companies acquired via IBOs do not exhibit increased productivity or profitability in the wake of a significant reduction in employment. This highlights the need for new management to better understand the link between employment and performance in the specific corporate setting of the acquired firm.

Keywords: Corporate Governance, Private Equity, Institutional Buyouts, Takeovers, Employment, UK

Suggested Citation

Goergen, Marc and O'Sullivan, Noel and Wood, Geoff, Private Equity Takeovers and Employment in the UK: Some Empirical Evidence (May 1, 2011). Corporate Governance: An International Review, Vol. 19, No. 3, pp. 259-275, 2011. Available at SSRN: https://ssrn.com/abstract=1837188 or http://dx.doi.org/10.1111/j.1467-8683.2011.00853.x

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Noel O'Sullivan

Loughborough University - School of Business and Economics ( email )

Ashby Road
Loughborough
Leicestershire LE11, LE11 3TU
Great Britain
44 1509 223114 (Phone)

Geoff Wood

University of Essex

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