Private equity defends job record
Companies bought by private equity firms do not destroy jobs on a large scale, a study suggests.
The private equity industry has been accused of "quick flips" stripping company assets and axing jobs before selling firms or closing them down.
But research for the World Economic Forum suggests that private equity tends to stay invested for five years.
And compared to rivals, firms owned by private equity axe more old and create more new jobs, but rarely go bankrupt.
Private equity firms are investment funds that tend to focus on buying companies that are undervalued or poorly managed, in order to turn them around and sell at a profit.
To do that, they combine their own capital with borrowed money, which has to be paid back out of the cashflow of the acquired company.
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Original source : BBC News Online
