The employment consequences of private equity acquisitions: The case of institutional buy outs

Marc Goergen, Noel O'Sullivan, Geoffrey Wood

Research output: Contribution to journalArticlepeer-review

20 Citations (SciVal)


There is a growing controversy as to the impact of private equity acquisitions, especially in terms of their impact on employment and subsequent organizational performance. It has been suggested that closer owner supervision and the injection of a new management team revitalize the acquired organization and unlock dormant capabilities and value. However, both politicians and trade unionists suggest that private equity acquirers may significantly reallocate value away from employees to short term investors, typically through layoffs and reduced wages, which may undermine future organizational sustainability. This article investigates this in the context of a sample of institutional buy outs (IBOs) undertaken in the UK between 1997 and 2006. Specifically we examine the impact of IBOs on both employment and remuneration against two control groups of non-acquired firms. In designing our study we follow the empirical approach taken by Conyon et al. (2001, 2002) in investigating the employment consequences of regular takeovers. Our main finding is a significant loss in employment in firms subject to an IBO in the year immediately following the acquisition as well as lower wage rates, when compared to either of the two control groups. Furthermore, we find no evidence of a subsequent improvement either in productivity or profitability in the acquired businesses.

Original languageEnglish
Pages (from-to)67-79
Number of pages13
JournalEuropean Economic Review
Publication statusPublished - 30 Nov 2014

Bibliographical note

Funding Information:
This paper has benefited significantly from the insightful and constructive comments of an anonymous reviewer. The financial support of the Nuffield Foundation (grant no: SGS/34848 ) is also gratefully acknowledged.


  • Acquisitions
  • Employment
  • Institutional buy outs (IBOs)
  • Private equity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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