The World Economic Forum in Davos was the venue for the launch of a survey of the private equity business by the Harvard Business School. It concludes that private equity takeovers don’t have much effect on the companies they buy.
The report found that jobs shrank 7 per cent faster at the existing sites of private equity owned companies with the fastest shrink in the first three years of private equity ownership. However, adds the report, private equity owned companies grow jobs 6 per cent faster than comparable companies by opening new sites –i.e. shops, factories and offices.
As regards R&D, the report said private equity companies file as many patents as other comparable companies, but the private equity patents are more focussed on the private equity owned companies’ core business than in other companies.
42 per cent of private equity deals result in the acquisitions being sold within five years. 12 per cent of the companies acquired are sold on within two years, said the report, 58 per cent of private equity acquired companies were held for over five years.
The failure rate of private equity deals is higher than with comparable companies Six per cent of private equity acquired companies go bankrupt or have to be financially re-structured.
The report surveyed 21,397 private equity deals completed between 1970 and 2007.
Leave a comment