Private Equity, HRM and Employment - What's the impact?
Earlier this year, the Cass Business School of the City University of London published an interesting paper on the impact of the different types of private equity (PE) investments (mostly in the form of leveraged buy-outs) on human resources policies and employment within the acquired companies.
The conclusions of the research should not come as a surprise for HR professionals who have experience with M&A and PE. The private equity LBO's most likely to have a negative impact on employment (translated by PE critics as "value transferred to shareholders at the expense of workers’ jobs and wages") are management buyins and investor-led buyouts of listed corporations, typically because of pre-LBO performance difficulties.
However, the meta-study conducted by Professor Nick Bacon and his team suggests positive effects of private equity LBOs on employment and wages, and that private equity LBOs are better-managed than firms under other alternative forms of ownership. However, country and institutional context appears to matter, with employment and wage effects appearing to be more positive outside the US and the UK.
The full article is available on the site of the Cass Business School.