January 17, 2008 / 6:02 AM / 10 years ago

Private equity points to job gains in firm takeovers

WASHINGTON, Jan 17 (Reuters) - The U.S. private equity industry, under congressional scrutiny over the taxes paid by top partners, said on Thursday that their takeovers of companies have contributed to job gains, not losses.

An industry-backed study, co-authored by a former Clinton administration official, found that overall employment in companies acquired by private equity firms rose 8.4 percent worldwide over a three-year period.

The study looked at data from 42 global companies bought out by eight U.S. private equity firms between 2002 and 2005. It found that total combined employment at all 42 companies rose to 336,634 from 310,420.

Firms that provided data for the study included Kohlberg Kravis Roberts & Co, the Blackstone Group (BX.N), Apollo and the Carlyle Group.

"The data strongly suggests that private equity operations have solid, positive effects on U.S. employment," wrote co-authors former Commerce Department undersecretary Robert Shapiro and Nam Pham, president of NDP Group, an economic consulting firm.

According to the study, more than 76 percent of the companies surveyed recorded job gains, while less than 24 percent cut jobs.

"In cases in which a purchased company's inefficiencies are tied to low labor productivity and over-employment, the reorganization may include initial reductions," the authors said.

The Private Equity Council, which lobbies on behalf of private equity firms that buy and sell companies, commissioned the study and said it was the first part of a project to assess the economic impact of its business on the U.S. economy.

The study comes after a year in which private equity firms fought legislation that would have doubled the taxes managers pay on "carried interest" gains they make buying and selling companies. Congress is continuing to look at the possible tax increases. (Reporting by Rachelle Younglai; Editing by Leslie Gevirtz)

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