14 Dec 2018

The BVCA has launched the eleventh annual report on the performance of private equity-owned portfolio companies compiled by EY. The report presents independently prepared information to inform the broader business, regulatory and public debate on the impact of private equity ownership on large UK businesses, commissioned by the BVCA.

The aggregated data in the report covers 91% of the total population of portfolio companies, being all the large, UK businesses that met certain criteria applied at the time of their acquisition by private equity investors. This year, compliance for the current portfolio companies was 47 of 55, or 85%.

Key findings

In aggregate, the portfolio companies under the time of private equity ownership have shown positive growth in employment, investment, productivity, revenue, profits and returns to investors, and supported the high financial leverage that is a feature of the private equity business model. Compared to relevant public company and UK-wide private sector benchmarks, the performance of the portfolio companies on employment, investment, compensation and productivity growth is in-line or ahead of the comparators, indicating some benefits of the private equity ownership model versus alternatives.

  • Private equity investments in the portfolio companies are long term, with an average timeframe of 5.7 years from initial investment to exit. The current portfolio companies have been owned for an average of 3.9 years.
  • Over the duration of PE ownership of the portfolio companies, underlying organic employment (removing the effect of bolt-on acquisitions and partial disposals) has grown by 1.3% per annum, in line with the UK private sector benchmark of 1.3% growth.
  • Employee compensation growth under PE ownership is slightly above the UK private sector benchmark, at 3.3% versus 2.5% annual growth.
  • Operating capital employed has grown at 1.9% per annum. There has been more investment in bolt-on acquisitions than funds realised from partial disposals.
  • Capital productivity growth in the portfolio companies exceeds public company benchmarks, at 7.4% versus 0.6% growth per annum, whilst labour productivity growth at just under 2% growth per annum is broadly in line benchmarks.
  • Returns to equity investors from realised investments (pre fees) are 3.8x the returns from the same sector and timeframe in the UK public stock market: benefit of strategic outperformance and additional leverage.

Harry Nicholson, EY partner, who led the research, said: “Analysing the last eleven years of data on this defined set of current and past portfolio companies shows the effects of private ownership on large UK businesses. While there is variation at the individual portfolio company level, in aggregate the findings are clear that the private equity effect is positive, or neutral, on large UK business across all of the measures that we have tested. The private equity-owned portfolio companies generate employment, increase investment and grow.”

About the report

This is the eleventh annual report on the performance of portfolio companies, a group of large, private equity-owned UK businesses that met defined criteria at the time of acquisition. Its publication is one of the steps adopted by the private equity industry to improve transparency and disclosure, under the oversight of the Private Equity Reporting Group.

The report is based on information provided on the portfolio companies by the private equity firms that own them. With a large number of portfolio companies, and now eleven years of information, this report provides a comprehensive and detailed insight into the effect of private equity ownership on large, UK businesses. As the study notes, it is possible to make a wide range of claims about the effect of private equity ownership if the fact-base is limited to any one or two examples. This report aggregates data across a defined set of businesses, which gives a robust fact-base.

Notes to editors

About EY

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Further information


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