Working Paper | HBS Working Paper Series | 2018
Private Equity, Jobs, and Productivity: Reply to Ayash and Rastad
Steven J. Davis, John Haltiwanger, Kyle Handley, Ron S. Jarmin, Josh Lerner and Javier Miranda
Keywords: Private Equity; Leveraged Buyouts; Jobs and Positions; Performance Productivity;
Citation:Davis, Steven J., John Haltiwanger, Kyle Handley, Ron S. Jarmin, Josh Lerner, and Javier Miranda. "Private Equity, Jobs, and Productivity: Reply to Ayash and Rastad." Harvard Business School Working Paper, No. 18-074, January 2018. View Details
Drilling Deep to Find the Right Expertise
A private equity group was evaluating the purchase of an industrial-cleaning company with Fortune 100 customers in the oil, paper, utility, and steel industries. To get comfortable with their investment, our client needed to connect with people who understood:
- The demand and frequency of cleaning and coating maintenance services
- How the cleaning firms are selected and by whom
- Outsourcing trends within the sector
- The overall competitive landscape
We quickly learned that this information resided far below the executive suites of the target company’s customers, deep within their organization charts. Current and former executives of competitive firms would also be useful.
- Former C-level executives of competing outsourced service providers
- Current and former maintenance executives and supervisors at refineries, power generation facilities, and steel mills
- Personnel from key industry trade organizations
We went to work locating the real decision makers key to this industry, starting high up and working our way down the chain of command—SVP of operations, senior reliability officer, plant manager, and so on. Apex Leaders was able to put our client in contact with 11 experienced contacts who fit our profiles.
Through our contacts, our client learned that although cleaning vendors are put on an approved provider list at the corporate level, individual plant and maintenance managers made the ultimate decisions. Personal relationships and safety records were paramount. Price was secondary.
They also learned that their potential customers could not postpone the cleaning services and, as their facilities move towards 100% utilization, might increase their service needs.
Given these favorable trends, our client moved forward.
Staying Flexible When Strategies Shift
Our private equity client held an early-stage investment in a cardiovascular medical device company. They had a promising new product and wanted a new board member to help them navigate the byzantine FDA and CE regulatory processes as quickly as possible. With approval, they hoped to exit through a liquidity event.
Understanding a Changing Regulatory Landscape
Our client was interested in pursuing an investment in the lender placed insurance market. Recent regulations had been established, but many industry experts believed that they had not gone far enough. In order to move forward with the transaction, our client needed to understand the regulatory environment (current and future) in addition to the competitive landscape.
Retail Apparel Tagging
The world of fashion has changed. Gone are the days of seasonal clothing lines. Instead, clothing manufactures are continuing to push their designers and their manufacturers to turn out new lines in a matter of weeks. Our client was interested in an apparel tagging company that has the capabilities to keep up with the new speed of fashion. Before moving forward, our client needed to better understand the adoption of fast fashion, the role of customer service and how the larger competitors felt about jumping into this niche space.