Abstract This paper presents evidence of a large, persistent decline in establishment-level workplace injury rates after private equity (PE) buyouts of publicly traded U.S. firms. We find that firms experience fewer OSHA safety violations after buyouts and that a larger decline in injury rates is associated with an increased probability of exit via IPO. Employment reductions after buyouts are concentrated in relatively low-injury-risk establishments. Overall, our results suggest that buyouts improve workplace safety and that PE acquirers benefit from this improvement. We explore possible causes of these changes through interviews with executives of companies acquired in buyouts and through cross-sectional analysis.

Abstract Despite the prevalence of private equity (PE) buyouts of private firms, little is known about how these transactions create value. We provide evidence that PE acquirers disproportionately target private firms with weak operating profitability and those that have growth potential but are highly levered and dependent on external financing. Target firms grow rapidly post-buyout, especially those undertaking add-on acquisitions, and profitability increases for both profitable and unprofitable targets. Our evidence suggests that PE acquirers create value by relaxing financing constraints for firms with strong investment opportunities and improving the performance of weak firms, while financial engineering plays a limited role.