(some) working papers
A large sample of employee reviews shows a decline in satisfaction after a Leveraged Buy-Out (LBO), but with significant heterogeneity. The key driver is the previous ownership structure. For Private-to-Private transactions, dissatisfaction is concentrated in non-management employees and comes mostly from how management treats them. In Public-to-Private transactions, the dissatisfaction is stronger, multi-faceted, and present for all employees, including management. Industry and Private Equity sponsor fixed effects are significant, but second order. Other ownership changes (M&A, IPO) trigger less dissatisfaction.
With Peter Morris and Betty H.T. Wu
Highly levered care homes have a death rate twice as high as unlevered care homes at the peak of the COVID-19 pandemic. Care homes controlled by private equity firms no longer display significantly higher death rates once controlling for leverage. Leverage matters only once accurately constructed: i) the full ownership structure of each care home needs to be identified; ii) operating leases must be capitalized and added to the balance sheet. These two issues have seldom been tackled in the literature and we show that they matter.
Using natural language processing, companies globally can be scored based on the frequency with which news articles contain both their names and private equity (PE) related vocabulary. An index can then be created, with the weight of each component set as a function of both their liquidity and their PE exposure scores. This procedure generates a large set of firms whose underlying business is PE-related. Even though the algorithm does not optimize on either return or correlation, we find that the listed PE index is highly correlated to, and has similar performance to, the PE fund market index. This low-cost and scalable process can be generalized to any theme an index seeks to capture.