Portfolio companies outperform their industry peers
Private equity firms have been considered ruthless profit maximisers for a long time, rarely interested in the sustainable development of their portfolio companies. In a broad-based study, INVERTO gained a different impression: Portfolio companies perform significantly better than their competitors without PE participation – in terms of revenue, operating profit (EBITDA) and number of employees.
For the assessment, INVERTO examined annual reports of 67 portfolio companies from five consecutive years between 2013 and 2019. The performance of companies from the industrial goods manufacturing and process industries was compared with that of companies from these industries that do not belong to a private equity (PE) company.
The most important results of the study
- Portfolio companies perform significantly better than their industry peers without PE involvement – in terms of revenue, operating profit (EBITDA) and number of employees.
- The disproportionate growth in EBITDA relative to revenue proves that PE companies achieve operating profits not only through accelerated revenue growth, but also through improved cost efficiency.
- By contrast, for companies without a PE involvement, profitability declines as revenues increase.