Private equity funded firms have created at least one million new jobs in Europe over the past four years, according to a survey by AT Kearney management consultants.
The survey of more than 30,000 companies in Europe and the US also found a significantly faster rate of jobs growth at PE firms compared to those not funded by PE capital.
Apart from creating new jobs, the study found average growth rates for European and US firms funded by PE to be between 4 and 26 per cent per annum.
At the same time profitability generally improved from 4 per cent before a PE investment to between 6 and 7 per cent after the investment.
AT Kearney Australia vice-president Jeremy Barker said the results were “good news for the many Australian companies being bought out by PE firms”.
“It would be not unreasonable to assume that similar results would be evident here, given the consistency of the PE model and that many PE firms operating locally are global players.”
Barker added that the survey should help to “dispel the myths about PE firms using just a ‘slash and burn’ approach”.
“These results reveal that private equity’s contribution to the development of new jobs is substantial, and in fact outperforms other types of companies.
“Whereas privately-financed firms often achieved, on average, double-digit growth in employment, firms financed traditionally grew very moderately on average, or even shed jobs.
“There tends to be an entrepreneurial spirit, rigorous attention to results, and very often, management own a meaningful stake in the company.
“These elements combine to generate jobs and value in the vast majority of cases,” he said.
