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What's Wrong With Trumka's Op-Ed

    In a recent op-ed in The Wall Street Journal, AFL-CIO President Richard L. Trumka mischaracterizes private equity’s record in creating jobs, strengthening companies and benefiting workers.


    Read the truth about private equity investment

    Private Equity and company performance

    1) Private equity-owned companies outperform comparable publicly traded companies in sales growth, cash flow, profitability and productivity.

    2) Two-thirds of the earnings growth (before taxes, interest and capital expense) at private equity owned companies results from business expansion, with organic revenue growth being the most significant element.

    3) Nearly three-quarters of the productivity growth at private equity-owned companies is due to more effective management of existing facilities.

    4) The benefits of improved performance are passed on to employees in the form of higher wages, competitive benefits and greater job security and stability.

    5) Private equity-owned companies are better managed than companies with other ownership structures and are particularly strong at operational management practices.

    6) Private equity ownership spurs greater advances in innovation. Patents filed by PE-owned firms were far more likely to be cited in other patent applications than those filed by firms not owned by private equity investors, the most commonly accepted measure of the economic impact of innovation used and accepted by researchers.

    7) Eighty-five percent of private equity firms included in a recent study increased capital expenditures in the three years after the private equity investment.

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    Sources

    1) “How Do Private Equity Investors Create Value? A Study of 2007 Exits,” Ernst & Young, 2008; Shapiro, Robert and Pham, Nam “The Impact of Private Equity Acquisitions and Operations on Capital Spending, Sales, Productivity and Employment” The Private Equity Council, January 2009; Gottschalg, Oliver “Private Equity and Leveraged Buy-outs Study” European Parliament 2007

    2) Ernst & Young, 2008 Op. Cit.

    3) The Global Impact of Private Equity Report 2009, “Private Equity, Jobs and Productivity,” Word Economic Forum, January 2009

    4) Ibid.

    5) The Global Impact of Private Equity Report 2009 “Do Private Equity Firms Have Better Management Practices,” World Economic Forum, January 2009

    6) Lerner, Josh, Morten Sørensen, & Per Strömberg. “Private Equity and Long-Run Investment: The Case for Innovation,” The Globalization of Alternative Investments Working Papers Volume 1: The Global Economic Impact of Private Equity Report 2008, World Economic Forum, January 2008

    7) Shapiro, Robert and Nam Pham “The Impact of Private Equity Acquisitions and Operations on Capital Spending, Sales, Productivity and Employment,” The Private Equity Council, January 2009