Companies that experienced private equity acquisitions also tended to advertise lower salaries in job postings in the 12 months that followed, Revelio found. — Bloomberg
NEW YORK: When companies are bought by private equity firms, they tend to lose more employees than competitors and post lower salaries in new job listings, according to workforce analytics firm Revelio Labs.
Turnover at these companies was similar to competing firms before acquisitions but higher in the 12 months following the buyouts, suggesting that the new owners may have implemented jobs cuts or that disgruntled employees became more likely to resign, a blog post by Revelio said.
Companies that experienced private equity acquisitions also tended to advertise lower salaries in job postings in the 12 months that followed, Revelio found.
The average salary change for operations-focused roles was 10.6% lower one year after being acquired by a private equity company, according to the post.
Numerous academic studies have examined the effect of private equity buyouts on employment at targeted firms, and they have often found employment drops, though the outcomes have varied depending on the context.
Revelio’s approach differs because it gathers data from a variety of sources including LinkedIn profiles, which have only become widely available to researchers in the last few years.
Revelio was founded in 2018 and generally provides workplace data and analysis to financial firms and corporate clients.
The findings are not entirely surprising given that private equity firms are often looking for opportunities to improve corporate efficiency and profits after an acquisition.
A 2014 study examining buyouts in the Britain between 1997 and 2006 found that there was a “significant loss” in employment in firms subject to buyouts in the year following acquisitions, in addition to lower wages, and no evidence for improved productivity or profitability.
A study in 2021 by researchers at the University of Chicago and other institutions found that, for private equity buyouts between 1980 and 2013, employment at target public companies shrank by 13% over two years following buyouts.
But it also found that when the acquired company was privately held, employment rose 13%, and that productivity gains at target firms overall were large.
Revelio used its data to also look at worker morale and the specific departments that have been the focus of job cuts.
Those in high paying roles and those working in support functions like marketing were the most likely to experience cuts, Revelio said, adding that the private equity industry should take the new findings into account.
“It is in the best interest of private equity firms to consider the long-term consequences of aggressive cost-cutting measures as the exodus of key employees and low morale can impact company growth,” the company’s post said. — Bloomberg
