Private equity buyouts outperform during recession- PRESS RELEASE

Private equity buyouts outperform during recession

March 18, 2011
Private equity-backed companies have outperformed both listed and other private businesses during the recession, according to new research.

'Private Equity Portfolio Company Performance Through the Recession' - a report produced by the Centre for Management Buy-out Research (CMBOR) and the Credit Management Research Centre (CMRC)- has tracked the performance of a large sample of private equity-backed buyouts between 1995 and 2010 and compares this to a sample of other private companies and stock exchange listed companies.

Key findings include:

• Private equity-backed buyouts showed a stronger financial performance in the period before and during the recent recession than listed and other private companies. In fact, private equity-backed buyouts produced higher profits and stronger turnover growth during the recession than before it.
• Controlling for deal size and industrial sector, private equity-backed buyouts completed post-2003 are significantly less likely to enter insolvency than listed companies, and no more likely to do so than other private companies. This was true even during the recession.
• Private equity-backed buyouts outperformed other private and listed companies on measures of efficiency and profitability, controlling for industry sector and competition. During the recession, the results show almost 14% higher productivity and 5% higher profitability

Colin Ellis, Chief Economist of the BVCA, said: "This study provides authoritative evidence on the performance of portfolio companies during the deepest recession that most of us can remember. Not only did private equity not cause the recession, but PE-backed businesses have actually outperformed other companies during the downturn. And with existing portfolios generally in good shape, the industry is ready to play its part and help drive economic growth in the years ahead."

The report's authors, Professors Mike Wright and Nick Wilson, said: "Our evidence is consistent with PE firms both adding value to portfolio companies and being proactively involved in taking timely action to assist portfolio companies in the event of financial distress."

FOR FURTHER INFORMATION PLEASE CONTACT

• Tom Allchorne, Public Relations Manager, BVCA, +44 (0)20 7420 1807
• Colin Ellis, Chief Economist, BVCA, +44 (0)20 7420 1830
• Professor Mike Wright, Director, Centre for Management Buyout Research, +44 (0)115 951 5257
• Professor Nick Wilson, Credit Management Research Centre, +44 (0) 113 343 4472

Notes to editors:

1. To read the report, please click here

2. The British Private Equity and Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 450 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.