Focusing on just the employment consequences on private equity, the strongest criticism is coming from trade union leaders. This is well exemplified on the figure of Brendan Barber, general secretary of the UK’s Trade Union Congress. He recently refereed in the FT to the form of private equity activity in the following way:”..short term returns are produced by ruthlessly reducing their companies to their core functions…” and has named this activity as “amoral asset strippers”. Though there might be cases that fall into that paradigm, it is hard to believe that this is the form most private equity act. Mr.Barber’s view has been challenged by a recent study from the Nottingham University’s Centre for Management Buy–Out Research. The study was conducted over a large sample of management buy-in and buy outs

The study finds different performance for employment in private equity deals driven by insiders and those driven by outsiders. The study reports that in the UK for a sample of 1,350 management buy-outs over the period 1993-2004, employment initially fell after the buy-out and then increased above pre-buyout levels. On average, by the fourth year employment was 21.4% higher. On the other hand, in management buy-ins there is a larger fall in employment level immediately after the deal. The level of employment remains below the pre-deal level and on average is 3.3% below the pre-deal level by the fourth year and after. A table from the study summarized results is copied below.

This is just one study and others will probably challenge the results, but the issue is obviously worth investigating.