ICYMI – Private equity-owned companies still set the pace for job creation
A new report, prepared by Boston Consulting Group, highlights how private equity-owned companies are creating new jobs at a faster rate than public companies. The analysis reviewed data from over 450 General Partners (GPs) and Limited Partners (LPs) representing approximately $38 trillion in assets under management.
Private equity-backed companies created a net four new jobs per 100 full-time employees this year. In contrast, the median public company created just one net new job per 100 full-time employees.
Read New Private Markets’ article on the findings below:
New Private Markets: Private equity-owned companies still set the pace for job creation
Analysis of the third year of EDCI data suggests that even amid tougher economic times, private equity-backed companies create new jobs faster than public companies.
Toby Mitchenall | October 23, 2024
Private equity-backed companies are still creating new jobs amid challenging macroeconomic conditions, albeit it at a slower rate than in previous years. This is one of the findings from this year’s data collated as part of the ESG Data Convergence Initiative (EDCI).
Private equity-backed companies created four net new hires per 100 full-time employees this year. While this is a significant slowdown from last year’s figure (nine net new hires per 100 FTEs) it still compares favourably with publicly owned companies, according to analysis prepared by Boston Consulting Group, which processed the data on behalf of the EDCI. The median public company created just one net new hire for every 100 full time staff.
“Last year’s EDCI results dispelled the myth that private companies are slower to create new jobs, net of attrition, than their public counterparts,” said BCG’s report on the data.
The slowed rate of new job creation “reflects the challenging macroeconomic environment, higher interest rates, slower company growth rates and a growing emphasis on digitisation and automation. Still, private companies continue to create jobs at a higher rate than public ones,” the firm said.
This is only the third year in which ESG data has been aggregated and analysed as part of the EDCI, an initiative that now counts more than 450 LP and GP members committed to report on a basket of common ESG metrics. Many of private equity’s most influential investors and managers are involved and the initiative has helped move the ESG conversation from how to gather data to what the data is telling us.
Benchmarks produced from the data are shared with EDCI members, but not with the public. In its analysis of the data, BCG, which supports the initiative, highlighted a number of other themes.
Gender diversity
Private equity-backed companies still outpace public companies when it comes to gender diversity at the C-suite, but lag public peers at the board level. Seventy-seven percent of private companies have at least one woman in the C-suite, compared with 64 percent in public markets, BCG states. At the board level only 61 percent of PE-backed companies have at least one woman on their board, compared with 89 percent of public companies.
The EDCI data supports the notion that the private equity ownership model supports ESG improvement across a portfolio company’s holding period. For example, companies within their first two years of PE ownership report lower levels gender diversity at board and C-suite level compared with those in their third year of PE ownership or beyond. Similar improvements can be seen in the fields of renewable energy usage and work-related injury rates.
