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Annual review finds private equity-backed businesses continue to outperform public companies

Publish Date 18 Jan 2024
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The latest Private Equity Annual Public Reports, the 16th in a series of yearly reports compiled by and for the Private Equity Reporting Group (PERG), the independent body setup to assess the industry on behalf of the British Private Equity & Venture Capital Association (BVCA), has been published today.

Collectively, the ‘Annual Report of the Private Equity Reporting Group’, the ‘Good Practice Reporting Guide for portfolio companies’, and the ‘Annual Report on the performance of portfolio companies’ demonstrate the private equity industry’s commitment to good practice financial reporting.


Key highlights include
  • Analysis shows that aggregate trading results for PE-backed companies moderated slightly versus comparative levels in 2021, with revenue and EBITDA growth since acquisition of 7.0% (2021: 7.8%) and 4.9% (2021: 6.0%) respectively.
  • PE backed businesses did however outperform the public company benchmarks at a revenue increase of 7.0% Compound Annual Growth Rate (CAGR) since acquisition versus 5.4%, partly driven by the growth of the consumer sector.
  • Organic revenue and organic EBITDA of PE backed companies increased by 5.7% and 3.2% CAGR respectively since acquisition (2021: 4.9% and 4.3%).
  • Disclosures show an improvement in quality of disclosure on board composition and strategy, but a deterioration in standard of compliance regarding risks and non-financial KPI’s.
  • Private equity investments average hold time of 5.9 years is flat on last year.
  • Employment under PE ownership has increased by 2.0% per annum (2021:1.5%) since acquisition.
  • Portfolio companies had an average leverage ratio of 6.5x gross debt to EBITDA at acquisition (2021: 6.6x) compared with 6.9x at the latest date or exit (2021: 6.9x).
  • Equity return from portfolio company exits was 3.0x the public company benchmark, consistent with last year.

 

Nick Land, the Chairman of the Private Equity Reporting Group (PERG), said:

“Today is a chance to reflect on and quantify the considerable contribution private equity makes to the UK economy. Most of the reports reviewed were compliant with the Walker Guidelines and were produced to a good or excellent standard, with particular improvements in the depth of disclosures relating to financial KPIs and financial position, which is positive given the difficulties businesses are facing.

“Disappointingly, one company was non-compliant, having failed to comply with multiple disclosure requirements. This year, we also noted a deterioration in reporting on non-financial KPIs and a need to be more compliant on disclosures on social matters and gender diversity. We hope to see private equity firms continue to meet calls for greater quality disclosures in this pivotal moment for our sector.”


Michael Moore, Chief Executive of the BVCA, said:

“The PERG guidelines are a world leading tool for transparency and disclosure for large private equity-backed businesses and at the BVCA, we are glad to see that our entire membership within the population is compliant.

“It is our goal to demonstrate the value, sustainability and transparency of private equity investment in the UK, so it is encouraging to see increased disclosures on financial position, business strategy and employees. This year’s reports also show the impact of the uncertain macroeconomic environment, legacy COVID-19 issues and the high rate of inflation on the private equity industry.

“Developing higher standards is a shared aim of our members, and all private equity firms in scope of the guidelines need to embrace increased transparency and disclosure. We will be working this year with private equity firms and their portfolio companies to develop their reporting further. Doing so enables us to collectively tell the story of the vital role played by private equity in the UK economy, and through that build greater trust with our key stakeholders.”

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