Private equity funds like to tout their investments as being resilient during economic downturns. This Institutional Investor article highlights a recent study that supports that hypothesis. The study found that PE-backed companies outperformed their non-sponsored peers during the 2020 downturn resulting from the COVID-19 pandemic:
PE-backed companies significantly outperformed their unsponsored peers during the economic downturn unleashed by Covid-19 in 2020, according to the latest research from Paul Lavery from the Adam Smith Business School at the University of Glasgow and Nick Wilson from the Credit Management Research Centre at Leeds University Business School. Firms owned by private equity had higher growth in sales, assets, head count, and other key performance metrics in 2020 and 2021.
Sales at PE-owned companies increased 6 percent more than at other private companies, while total assets rose 10 percent more, according to the research.
The study’s authors point out that theirs isn’t the first study to support the idea that PE-backed businesses are more resilient during hard times than other businesses. Several studies found similar results in the wake of the 2008 global financial crisis.
– John Jenkins