New research on private equity surprises even some of the experts

Jan 27th, 2008 | Filed under: Academic Research, Hedge Fund Regulation, Private Equity | By:
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Skeptics often content that private equity (and hedge fund) “locusts” are holding companies for ever-shorter periods of time in an effort to extract value and high-tail it out of an investment before things go south.  Some, particularly trade unions, also believe that private equity take-over targets are destined to lose jobs following an acquisition (see related posting).

But both of these contentions have been called into question by a new research report commissioned by the World Economic Forum and released in Davos on Friday.  The report was led by Harvard’s VC guru Josh Lerner, was advised by a group including hedge fund demigod David Swensen of Yale and, according to its introduction, represents “an unprecedented endeavour linking active practitioners, leading academics, institutional investors in private equity and other constituents (such as organized labour) and boasts involvement from many parts of the globe.”

The full report, “The Global Economic Impact of Private Equity”, is available here.  It’s highly comprehensive to say the least and weighs in at 189 pages.  But if you don’t have several hours to kill, you can always read the key findings in a press release available here.

Lerner told a panel audience in Davos on Saturday that academic research on private equity hadn’t been as extensive in recent years as it had back in the 1980′s (full 70-minute panel video, official summary).  Hence the impetus for this new round of papers and case studies.  Perhaps due to this dearth of contemporary research, Lerner said he was surprised by a few of the report’s findings.  Said Lerner:

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