Private equity and value creation
The study finds that, even after considering such timing effects, improvements in operational efficiency and revenue growth are strongly associated with higher investor returns. Firms in the EBRD regions that experienced higher sales growth and productivity when they were part of a PE fund’s portfolio also generated the largest returns for investors.
Private equity (PE) remains an underutilised source of funding for firms in the EBRD regions. This EBRD Impact Brief explores how private equity can help companies prosper. It reports on a detailed study of both textual and financial data from more than 170 private equity funds that the EBRD invested in over a period of 25 years.1 The findings show that PE funds follow a rich set of strategies to create value during the life of a deal. These strategies typically increase operational efficiency in the companies they support – boosting investment, employment and sales – even when compared with equally high-growth and profitable companies. The data show that most operational improvements instigated by PE funds persist after the funds have fully exited their investments.
