Private equity financing & firm productivity

We study the impact of private equity funding and ownership on firm level productivity using a comprehensive dataset of private equity transactions from the U.K. We outline the mechanisms through which private equity, as active owners, can build resilience and drive productivity growth in their portfolio firms. We find that, in comparison to a control group, private equity target firms enjoy a statistically significant productivity boost after acquisition. Our analysis suggest that this beneficial productivity effect persists even after the private equity fund exits the firm. We find statistically significant increases in employment and capital expenditures in target firms, in comparison to the control group, supporting the view that private equity unlocks the growth potential of firms. Moreover, our analysis suggests that target firm productivity may be more resilient during times of major disruptive episodes such as the Global Financial Crisis and the COVID-19 pandemic.