What are the effects of private equity?

There is a recent two-part series by Steve Kaplan, arguably the leading researcher in the area.  Here is part one and here is an excerpt:

Some, including presidential candidates Newt Gingrich and Rick Perry, criticize private equity for gutting companies and destroying jobs. The private equity industry and Mitt Romney argue that private equity creates jobs. The best empirical evidence—co-authored by one of my colleagues, Steve Davis—says the answer is that private equity both creates and eliminates jobs.³After a buyout, employment in existing operations tends to decline relative to other companies in the same industry by about 3 percent. Many of those job losses are undoubtedly painful.

At the same time, however, employment in new operations tends to increase relative to other companies in the same industry by more than 2 percent. Davis et al. conclude that “the overall impact of private equity transactions on firm-level employment growth is quite modest.”

Here is part two, which focuses on Bain.