Our analyses provide additional facts and insight which prove that PE can provide a mechanism to accelerate growth.
Summary: Our analysis demonstrates that private equity (PE) continues to create outperformance through strategic and operational improvements, even in the harshest of climates.
Private equity exits returned in 2010
The last five years proved to be a tumultuous time for PE-backed exits, but 2010 represented the return of a more active PE market. Those who managed well through the deep dive were rewarded in 2010, demonstrating the resiliency of PE.
Overall, the exit trends point to a return to more normal levels, particularly as our North American findings are consistent with the research we have conducted in Europe.
Our study, based on 230 of the largest exits (greater than US$150m entry enterprise value, or EV) over the last five years, represents a combined entry enterprise value of US$213.3b and uncovers the leading practices used by firms who enjoyed those rewards.
As the longest running study of its kind, we believe our analyses provide additional facts and insight, which prove that PE can provide a mechanism to accelerate growth. PE accomplishes this through responsible investment that can support businesses of all sizes, through good times and bad.
This year’s study builds on our previous research to demonstrate that PE consistently creates outperformance through strategic and operational improvement, even in the harshest of climates.
Fifty-seven percent of returns generated by PE between 2006 and 2010 can be attributed to PE's value-add, with operational improvement driving the majority of value creation, rather than multiple expansion and additional leverage. And, our study shows that PE exits continue to outperform comparable public companies in terms of EBITDA growth, employment growth and productivity growth.
However, the outlook for PE remains uncertain, consistent with the state of the overall global economy. PE is facing a record number of portfolio companies held for a longer periods of time.
While we have seen higher sales volume in 2010 and so far in 2011, the "overhang" is significant. At a time when PE and the market are experiencing yet further unprecedented events, we are encouraged that our analysis continues to be a part of the dialogue.
In the following sections, we take a closer look at PE exits, strategies and future outlook: