Private equity-backed companies form part of what we at BDO like to call the UK’s ‘economic engine’. The economic engine being fast-growth, entrepreneurially-spirited, mid-sized businesses that are driving growth and employment in the UK.
Over the years, private equity has taken more than its fair share of flak. There’s a misconception still held by some that private equity investors are little more than asset strippers.
In my opinion, that view is long out of date. Yes, investors are there to make good returns on their investment but there’s so much more to what they do and the impact it has. I think all of us that are involved in the PE community in some way have a part to play in giving PE a bit of a rebrand.
We’ve recently completed some analysis into the performance of 2,000 PE-backed companies, which will hopefully not only prove that the ‘asset strippers’ label is past its sell by date but also highlight the importance of private equity to our economy.
Here’s what the findings told us…
- In the last five years, PE-backed companies increased turnover by 53% to £47.1bn. That represents an additional £17bn in revenues to the UK economy.
- The same group of businesses also bolstered the UK labour market, increasing employment levels by 43% and creating 86,500 new jobs.
The figures speak for themselves. Businesses that have the backing of private equity investors are driving growth and creating jobs against a backdrop of uncertainty. Without these fast-growth businesses, the UK economy would suffer.
Growth – both in revenues and employment – by PE-backed firms is much faster than your typical large corporate or small business yet we don’t seem to hear much about the success stories that PE investment helps create. Perhaps it’s time we started seeing PE investors as the ‘white knights’ of business rather than the malevolent asset strippers? Maybe that’s one step too far but you get my point.
My advice is simple. If you have a proven business model and are looking for investment to drive faster growth and expansion, ignore the misconceptions or occasional bad headline and consider PE as a credible option.
Private equity can be a fantastic experience and the potential rewards can be huge. The outcome is often a very successful, and valuable, business.
Download our New Economy report for more information on the UK economic engine and its contributions towards a new economy.
Jamie Austin is Head of Private Equity at BDO.