Let's face it: we like to be able to think in black and white. Extra large fries? Bad for us. Kale? Good for us.
Of course, in the financial and business world, things are a little murkier. Is that actively managed mutual fund good? Are subprime loans always bad? These questions don't always come with a simple "yes" or "no."
This is why buyouts are so interesting: while the private equity firms that orchestrate them often profit from these massive deals, it's not so obvious how buyouts actually affect the little people.
So are leveraged buyouts good or bad for the people working at those companies?
The answer is, as always, that it depends.
The benefits of private equity
Leveraged buyouts involve putting debt on a company's books in order to help finance a takeover. Back in the day, a lot of leveraged buyouts involved splitting companies up and selling them off, but these days you're more likely to see an aggressive reimagination of operations to make the purchased business more profitable.
To find out if that's doing us as employees any good, a new study looked at career changes across a sample of people working at bought-out firms.
They found that, rather than killing their career prospects, the average employee of a bought-out company has employment spells that are 6% to 9% longer than people who work for firms that weren't bought out.
In other words, those employees don't just stay longer at their current jobs -- they stay longer at subsequent jobs as well. They also have shorter unemployment spells, which I think we can all agree is a major bonus.
How is that possible?
The researchers found that private equity's focus on improving operations is at the heart of these benefits. Specifically, the relationship is driven by investment in information technology. New and improved systems give employees new and improved skills, which makes them more employable both in their current job and when they switch firms.
Of course, those perks don't necessarily accrue to all employees. It's those who are most affected by IT investments who get the benefits. While they aren't confined to a particular department, they are more likely to be college educated and highly trainable.
Oh, so it's the "valuable" workers who benefit
Ah, you're thinking, that's obvious: educated/trainable employees are a) more likely to survive a buyout in the first place, and b) more likely to be highly coveted employees in general.
That's a reasonable assumption. When they looked into this question, the researchers found that the career pattern changes didn't apply to all the retained workers of a bought out firm; rather, they impacted most those people who were affected by IT investment.
In other words, it wasn't the person per se that made the difference, but rather the operational change and additional training. It just so happens that the people who could take the most advantage tended to be those who were more educated and/or willing to learn.
Make it work for you
If you work for a company that's being targeted by private equity firms, don't lose hope. You might see some changes for the worse in your job, but you might also stand a good chance of seeing some changes for the better. If you're open to those changes and take advantage of new training and new technology, you'll find that a buyout can actually help your career.
So, if your firm is facing down a buyout, don't despair. Instead, prepare yourself for a potential career boost and dive right in.
