Private equity firms employ job cuts, salary freezes to get by

Posted Aug 19th 2009 3:20PM by Trey Thoelcke
Filed under: Competitive Strategy, Private Equity, Recession

A survey of U.S. private equity executives and professionals conducted by advisory firms RSM Bentley Jennison and RSM McGladrey concluded that slashing jobs was the most common approach to cost-cutting among private equity firms.

Nine out of ten respondents said they have cut jobs at their portfolio companies in an attempt to rein in costs during the economic downturn.

More than 80% said they had improved their working capital management, including freezing salaries at portfolio companies.

A reduction of capital spending was another popular method for guiding portfolio companies through the recession. Almost seven in ten of respondents said they had attempted to reduce spending.

Almost 40% said they had initiated restructuring or sought turnaround assistance.

Less than 20% have sold businesses, divisions, or products to ease the constraints on their portfolio.

And a similar number of respondents had completed add-on acquisitions, despite accelerating rates of consolidation in markets. Firms remain cautious about deals unless synergies are very clear.

Tags: Bentley Jennison, cost-cutting, inthenews, job cuts, McGladrey, private equity