Do Employees Cheer for Private Equity? The Heterogeneous Effects of Buyouts on Job Quality.

This article examines the impact of private equity (PE) leveraged buyouts (LBOs) on employee-perceived job quality using a large dataset of over three million Glassdoor reviews matched with detailed PE deal and investor return data. The main finding is that LBOs significantly reduce employee satisfaction with compensation, culture, work–life balance, and senior management despite no average decline in base pay, suggesting employees bear greater risk post-buyout. This risk-bearing mechanism is supported by stronger negative effects in high-leverage deals, among long-tenured and lower-skill workers, and industries with higher unemployment, as well as increased use of managerial incentive pay that ties employee compensation more closely to firm performance. Compared to public firms, PE-owned companies exhibit greater pass-through of financial returns to employees' variable pay and satisfaction, indicating a distinct ownership effect on labor beyond wage changes or layoffs.