The Private Equity Stakeholder Project (PESP) has submitted testimony for the U.S. Senate Banking Committee Economic Policy Subcommittee October 20 hearing: “Protecting Companies and Communities from Private Equity Abuse.”
The private equity industry has grown dramatically in recent years. Private equity and other private funds firms had less than $1 trillion in assets under management in 2004. They now manage more than $7.5 trillion, and are growing quickly.
While the world and the global economy continue to struggle with the COVID-19 pandemic, private equity firms have taken advantage of the flood of cheap debt that the US Federal Reserve’s and other central banks’ stimulus efforts have made available to buy companies at a record pace and to extract debt-funded dividends from companies they currently own.
In the first half of 2021, private equity firms had their busiest six months ever, announcing 6,298 deals worth $513 billion, according to the Financial Times.
As private equity firms and deals have grown, they have come to impact growing numbers of people. In the past year, private equity firms have acquired companies with hundreds of thousands of workers such as G4S (530,000) and Dunkin Brands (250,000). A private equity-owned rural hospital company, LifePoint Health, is in the process of trying to acquire competitor Kindred Healthcare. The combined company will have 77,000 employees in 34 states and will be the largest private-equity-owned healthcare company in the US.
Based on reports by the private equity industry‘s main lobbying group, the number of US employees at private equity-owned companies has increased substantially in recent years – from 8.8 million in 2018 to 11.7 million in 2020, a 33% increase. This increase is striking as overall US employment dropped by 4.5% over the same period.
Based on academic studies showing that private equity takeovers typically result in job losses at acquired companies, this increase appears to be largely driven by private equity firms acquiring more and larger companies – putting the jobs of millions more US workers at risk.
The private equity buying spree that we have seen over the past year is certain to continue. As of mid 2021, private funds managers had amassed a record $3.3 trillion of unspent capital.