How do buyouts affect companies?

In the first years after being bought out by a private equity firm, companies are more likely to face layoffs and the closure of existing locations. We're worried about what this could mean for Bright Horizons centers.

Companies owned by private equity buyout firms like Bain Capital typically experience more layoffs than other companies in the wake of a buyout -even a leading private equity CEO admits that "in the first year or two after a private equity transaction, firms typically do experience layoffs," according to Forbes magazine.  

Research also shows that in the first few years after a buyout, companies owned by private equity firms shut down existing locations at a higher rate than comparable companies not owned by buyout firms. A study by the World Economic Forum concluded:

"We can say with confidence that the net impact [of private equity buyouts] on existing establishments is negative and substantial."  

The New York Times found that when large private equity groups bought nursing home chains, staffing typically was cut and the quality of care fell.

"Serious quality-of-care deficiencies-like moldy food and the restraining of residents for long periods or the administration of wrong medications-rose at every large nursing home chain after it was acquired by a private investment group from 2000 to 2006, even as citations declined at many other homes and chains."

"The typical nursing home acquired by a large investment company before 2006 scored worse than national rates in 12 of 14 indicators that regulators use to track ailments of long-term residents. Those ailments include bedsores and easily preventable infections, as well as the need to be restrained. Before they were acquired by private investors, many of those homes scored at or above national averages in similar measurements."

The costs and fees associated with the buyout process are another pressure on the finances of the companies that private equity firms take over. For fees and expenses related to the buyout, Bright Horizons has estimated it will spend nearly $30 million—more than $400 per child attending a Bright Horizons center. We're worried about what this could mean for children at Bright Horizons.

Companies owned by private equity buyout firms like Bain Capital typically experience more layoffs than other companies in the first few years after a buyout—even a leading private equity CEO admits this, according to Forbes magazine.

Research also shows that in the first few years after a buyout, companies owned by private equity firms shut down locations at a higher rate than comparable companies not owned by buyout firms. A study by the World Economic Forum concluded:

“We can say with confidence that the net impact [of private equity buyouts] on existing establishments is negative and substantial.”

While private equity firms claim that they increase companies’ overall employment in the long-term, that argument provides little comfort for the children, staff, and parents facing disruption and instability if their center shuts down.

Michael Flaherty wrote in Reuters:

“Layoffs are a common result of private equity takeovers, with Bain Capital no exception… Cutting costs is a basic ingredient of a leveraged buyout, as private equity firms need to wring out profits and boost cash flows to pay down debt payments.”

The costs and fees associated with the buyout process are another pressure on the finances of the companies that private equity firms take over. For fees and expenses related to the buyout, Bright Horizons has estimated it will spend nearly $30 million—more than $400 per child attending a Bright Horizons center.