PEGCC CEO Steve Judge Responds to Krugman Column in NY Times with Letter to the Editor
Private Equity Buyouts
To the Editor:
Paul Krugman’s Dec. 9 column, “All the G.O.P.’s Gekkos,” casts private equity firms as job destroyers, but we believe that the research tells a different story.
Private equity firms typically buy companies that are underperforming or mismanaged, with the goal of improving operations to make them stronger, more competitive and more valuable. This often requires the private equity sponsor to chart a new course for the company — one that creates growth opportunities and, in many cases, long-term success.
It’s hard work, the kind that publicly traded companies cannot always undertake. And in most cases it’s the right approach, delivering benefits to the company, its employees and investors.
This pattern — of recreating companies — is borne out in recent research, which finds that initial job losses as a result of private equity transactions are followed by higher than average greenfield job gains (when new plants are built, for example), and that the net effect of worker turnover — both hiring and layoffs — is less than 1 percent.
Private equity firms also make late-stage investments in companies that are distressed or even facing bankruptcy. The jobs that are saved in these situations are often overlooked by our critics.
STEVE JUDGE
Interim President and Chief Executive
Private Equity Growth Capital Council
Washington, Dec. 9, 2011
Read the letter at the New York Times.
