Author: Biz India

By Ashley Potter Leveraged buyouts do not increase redundancies or lead to the introduction of more insecure forms of work, according to new research. The findings contradict the widely-held view that leveraged buyouts – where investors use loans to buy under-performing companies they can then turn around and sell on – regularly lead to rapid job cuts and greater use of agency staff, fixed-term contracts and external contractors. Particular concerns had been raised that buyouts involving private equity funds, management buy-ins, short-term deals or high levels of debt could lead to a so-called ‘buy, strip and flip’ approach. Yet researchers at Warwick Business School, Cass Business School, and Imperial College in the United Kingdom found jobs were no less secure, even when a leveraged buyout featured a ‘perfect storm’ of all these factors. Their findings are reported in the paper, Is Job Insecurity Higher in Leveraged Buyouts? This was published in the British Journal of Industrial Relations. Kim Hoque, of Warwick Business School, said: “The labor movement has waged a concerted international campaign to highlight the impact of leveraged buyouts on job security. “However, the theory that these buyouts work only in favor of investors, not staff and other stakeholders, does not hold water. “In some instances leveraged buyouts may well have led to downsizing and job insecurity, but our analysis suggests these cases are far from the norm.” Study Analyzed Data from 1,...