*** MEDIA ADVISORY ***
January 24, 2008

CONTACT: Andrew McDonald, Service Employees International Union (SEIU), +1 202-730-7338; andrew.mcdonald@seiu.org

Private equity-owned companies cut more jobs than their competitors, according to media reports of the study’s preliminary findings

**SEIU officials available for comment when final study is released**

WASHINGTON, DC – As the economy and jobs top the concerns of American voters, a new, major, independent study on the impact of private equity buyouts on jobs is expected to be released this week at the World Economic Forum in Davos, Switzerland. The buyout industry exercises significant influence over American jobs and employment practices, with buyout firms, through their portfolio companies, comprising five of the top ten largest US-based private employers. The five largest US buyout firms alone own companies that employ an estimated 2.7 million workers.

The new study, on the Economic Impact of Private Equity, is being led by Josh Lerner, professor at Harvard Business School, and Steven Davis, professor at the University of Chicago’s Graduate School of Business, who analyzed 5,000 private-equity transactions from 1980 through 2005.

According to a November 29 Wall Street Journal news report last year on the preliminary results of the study, “Over the first five years of ownership, private-equity firms reduce their work forces by amounts greater than the other companies; the losses come mostly in the second and third years; and cuts are greater in retail businesses than in industrial companies.”

The Wall St. Journal report also said, “By the end of five years, job growth within private equity-backed companies was a ‘few percentage points’ lower than competitors, Mr. Lerner said. In some cases, that means those companies eliminated more jobs than competitors; in other cases, it means they simply added fewer new workers to the payroll.”

To date there has been little reliable, comprehensive, or independent research of the issue of private equity buyouts and jobs. Despite claims by some recent reports that private equity buyouts create jobs, serious problems with the methodology, assumptions, and conclusions of existing studies raise significant questions about the reports’ accuracy and reliability. For more details, see page 17 of SEIU’s Behind the Buyouts report (April 2007), available at www.BehindtheBuyouts.org.

Recent Buyout Industry Claims
A case in point is the jobs study released this month by the buyout industry’s Washington DC lobbying group, the Private Equity Council. Coming as the industry is being forced to defend its obscene profits and exploitation of tax loopholes, the new claims and timing appear to be an attempt to soften the impact of the Lerner/Davis World Economic Forum report.

The industry-sponsored study is deeply flawed. The study, which relies on self-reported data provided by big buyout firms, is based on a selective sample comprising only 42 anonymous companies acquired by eight hand-selected buyout firms between 2002 and 2005.
•    According to The Wall Street Journal, “the sample size is relatively small compared to the total number of buyout transactions typically conducted in a year-– a whopping 11,800 deals from 2000 to 2006 alone, according to the report.”
•    The Financial Times noted, the “study only considers data from 60 per cent of large portfolio companies between 2002 and 2005, potentially exposing it to criticism that the private equity firms were selective in offering the information.
•    Reuters commented, “without more information on how big a slice of the corporate universe controlled by private equity the surveyed companies represent, and why these particular companies were chosen for the survey and not others, the report seems to raise as many questions about job creation as it answers.”

In response to the industry-sponsored study, SEIU Private Equity Project Director Stephen Lerner said, “This study is part of a multi-million dollar lobbying plan by an industry on the defensive. There is little reason to trust and no way to verify self-reported claims by the super-secretive buyout industry.” 

Download this Media Advisory in PDF format