The supply chain spillovers of private equity buyouts

We study how private equity (PE) buyouts propagate through supply chains using unique firm-to-firm transactions data from Belgium. In normal times, suppliers of PE-backed firms outperform their peers by 5%–10% in employment and sales growth, primarily due to increased input demand from PE-backed customers rather than knowledge spillovers or other mechanisms. In economic downturns, however, this outperformance is attenuated and suppliers compress markups by around 8% as PE investors intensify bargaining pressure and reconfigure supply chains to extract cost savings. Beyond the direct effects on suppliers, we show that as PE-backed firms absorb supplier capacity, they crowd out competitors that rely on the same suppliers. Overall, our findings underscore that supply chains are central to how PE investors create and redistribute value. JEL Classification: D22, D24, G32, G34