A Convenient Truth: Private Equity and Portfolio Company Growth

Posted: 9 Jul 2013

See all articles by Nick Wilson

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Mike Wright

Imperial College London

Date Written: July 8, 2013

Abstract

This study examines the growth in private equity backed portfolio companies in the UK over the period from 1995 to 2012 using a dataset selected from the population of private and public companies in the UK including companies that received private equity backing. On the basis of real cumulative average growth rates (CAGR rolling 3 and 5 year periods), we find a consistent pattern of PE backed buyouts showing higher growth rates than non-PE backed buyouts for the first four years post buyout. Strongest increases in initial growth are displayed in respect of equity, total assets and value added. The growth rate remains positive throughout the post-buyout period for all variables except for sales and employment that become negative in year 7 post buyout. For the sub-period 2008-2011, PE backed buyouts are significant and positively associated with growth in all variables for both CAGR3 and 5 year periods, suggesting the PE backed firms’ growth has held up better than non-PE backed private companies. Board size is consistently significant and positively associated with all measures of growth, with significant and negative relationships between average director age and number of multiple directorships and all growth measures. Controlling for other factors, the extent of UK experience of PE firms is significant and positively associated with growth in value added, assets, sales, equity and employment. Foreign PE firms are significant and positively associated with growth in asset and equity but significant and negatively associated with employment growth.

Keywords: Private Equity, Growth, Performance

Suggested Citation

Wilson, Nicholas and Wright, Mike, A Convenient Truth: Private Equity and Portfolio Company Growth (July 8, 2013). Available at SSRN: https://ssrn.com/abstract=2290983

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Mike Wright

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
850
PlumX Metrics