The BVCA, in association with Ernst & Young, has today published its second annual report on the performance of the largest UK companies owned by private equity firms as recommended by the Walker Guidelines for Disclosure and Transparency in Private Equity.
The report analysed the 47 portfolio companies that met the Walker Guidelines criteria at December 31 2008. Eighty percent of the portfolio companies' latest financial year-ends are December 2008 or March 2009 and therefore capture the performance of these companies through the onset of the economic downturn and recession.
The sample size of companies has increased from 28 in the first report to 47 in this latest report. These companies were acquired for an aggregate £82bn in enterprise value and employ around 353,000 people.
The report found:
· Annual productivity growth at portfolio companies was 7.7%, significantly in excess of the UK rate of 1% productivity growth over the same timeframe.
· Average annual profit growth at the portfolio companies was 11% with average organic growth in profit of 8.8%.
· Bolt-on acquisitions significantly outweighed disposals, with tangible fixed assets growing by £8.6bn to £41bn.
Commenting on the report, Simon Walker, Chief Executive of the BVCA, said:
'The sample size is sufficiently large to draw substantive conclusions and these figures are, on the whole, promising ones considering the period covered. They should however be interpreted cautiously. While the profit and productivity growth figures are testament to private equity's focus on portfolio management through the recession, the economic outlook remains uncertain. Private equity-owned companies are not immune from the continuing recessionary pressures. Managing companies through the downturn and investing in them in preparation for the upturn when it arrives will continue to be the priority for private equity firms.'
Commenting on the report, Harry Nicholson, partner at Ernst & Young, stated:
'The private equity industry has taken further steps to improve transparency and disclosure. The change in criteria for inclusion in this report increased the number of companies reviewed from 28 to 47. As last year, all Private Equity firms complied with the request for data on the performance of their portfolio companies. The findings show that Private Equity investors have been successful owners of these large UK businesses, achieving strong growth in profits, investing and productivity both in absolute terms and versus public company benchmarks. Employment trends mirrored the UK economy as a whole. However in the latest financial year, which for most portfolio companies was to December 2008 or March 2009, growth rates slowed as the UK economy entered recession.'
For further information please contact:
Nathan Williams, BVCA 0207 420 1807/ 07825 678 701
Vicky Conybeer, Ernst & Young 020 7951 0868 / 07870 635 196
To view the full report, please visit BVCA Research here.