The European Central Bank has published a Working Paper, which it notes reflects the authors’ views rather than those of the ECB, examining how private equity buyouts spill over through supply chains. Using Belgian firm-to-firm transactions, balance sheet and deal data for 2002 to 2021, the paper finds that suppliers of private-equity-backed firms outperform comparable peers in normal times, with employment growth around 5% higher and sales growth around 10% higher, mainly because PE-backed customers buy more inputs. During economic downturns, however, that advantage disappears and suppliers cut markups by about 8% as PE investors intensify bargaining pressure and reconfigure supply chains to reduce costs. The study is based on a dataset covering roughly 241,000 firms and more than 200 matched PE buyouts in Belgium. It finds that PE-backed target firms themselves increase leverage and grow faster than matched controls, but the spillovers to suppliers are state-dependent. The positive supplier effect is strongest where customer input dependence is greater and longer-standing customer relationships exist, while the downturn effect is concentrated among suppliers with lower switching costs, such as those providing standardized inputs or operating in more competitive industries. Beyond direct supplier effects, the paper also finds crowding-out effects on competitors that rely on the same suppliers, as PE-backed firms absorb supplier capacity and shared rivals subsequently record weaker performance.
European Central Bank2026-05-19
European Central Bank publishes research showing private equity buyouts lift supplier growth in normal times but compress supplier markups by about 8 percent in downturns
The European Central Bank published a Working Paper on how private equity buyouts affect suppliers and competitors, using Belgian firm-level data from 2002 to 2021. It finds that suppliers of private-equity-backed firms grow faster in normal times but lose this advantage in downturns as investors intensify bargaining and reconfigure supply chains, with effects strongest where input dependence and long-standing relationships are higher. The paper also reports crowding-out effects on competitors that share suppliers with private-equity-backed firms.