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Private Equity Investment for Small and Mediam Sized Businesses
There has been something of an outcry in the media of late over the booming private equity industry. There is a growing perception that these companies are buying businesses, borrowing large amounts of cash at low interest rates, cutting costs, and plundering them for all the short term gain they can extract for themselves and their investors before selling on at a massive profit within a few years, leaving the business with few long term prospects. Private equity equals asset stripping has been the cry from many, including trade unions, who are most concerned about the resultant job losses.
They may well have a valid point according to a new study just published by the Work Foundation. Workers at private equity controlled companies were more likely to be worse off, whether or not they come under the new management. This is because wages grew more slowly at private equity controlled companies then in the rest of the private sector. Private equity companies where there had been a management buy-in (MBI) had jobs cut by an average of 18% over six years.
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