Join the PEC Network
Focus On:
Private Equity and Employment
In 2006, the Private Equity industry once again showed its ability to grow and strengthen the businesses under its ownership.
The average enterprise value of the businesses studied in the U.S. grew from U.S. $1.2 billion when acquired, to U.S. $2.2 billion at exit (+83%).
Employment levels were the same, or higher, at exit versus entry in 80% of U.S. deals.
Ernst & Young, “How do Private Equity Investors Create Value? A Study of 2006 Exits in the U.S. and Western Europe” – October 2007
During the five-year period to 2005/6, UK private equity-backed companies increased their worldwide staff levels by an average of 9% per annum. This is a significantly faster rate of growth that FTSE 100 and FTSE Mid-250 companies, at 1% and 2% respectively.
Furthermore, 73% of companies reported their growth to be organic, rather than by acquisition, following private equity backing.
British Private Equity and Venture Capital Association, “The Economic Impact of Private Equity in the UK” – 2006
Overall, jobs were more likely to have been gained than lost as a result of private equity-backed buys.
The Financial Times, in a study of the 30 largest European private equity transactions in 2003-04
Between 2000 and 2004, employment in the buyout-financed companies [studied] grew by a compound rate of 10.1%.
Applying this figure to the total employment in buyout-financed companies in 2004 reveals that 420,000 new jobs were created [in Europe] in this period. Employment in the EU 25 grew by a compound rate of 2.9% over the same period.
Employment growth in excess of 10% per year was reported by around 14% of the responding companies, while most portfolio companies (29%) increased their headcount by up to 5% following the buyout transaction.
European Private Equity & Venture Capital Association, “Employment contribution of Private Equity and Venture Capital in Europe” – November 2005
(Conducted by the Center for Entrepreneurial and Financial Studies, Technische Universität München)