Private equity is enhancing value in operating companies, according to analysis by CEPRES looking at thousands of PE-backed operating companies post the global financial crisis.
CEPRES has found that during the period there has been a steady and significant increase in average compound annual growth rate (CAGR) of EBITDA for PE-backed companies.
Further, CEPRES found that increase in valuation of companies post the financial crisis is driven more by EBITDA growth than prior years.
This evidence supports the view that activist PE fund managers are effective and able to deliver on the promise of delivering returns through value creation. CEPRES also found that valuations are currently being driven by increased market pricing – commonly called Multiple Expansion.
“There has been significant speculation about the role of private equity managers as activist investors and whether they actually create value,” says Dr Daniel Schmidt (pictured), chief executive of CEPRES. “Now, for the first time ever, we have hard evidence for investors and fund managers to benchmark their investee companies. It is positive to see such a clear trend and to have the ability to measure and compare these results when investing in private equity. There can be variations for different strategies, sectors, etc and we encourage participants to get in touch for specific samples.”
