Private equity gives mid-market a boost

The research reveals that 64% of mid-market companies involved in private equity buyouts achieved their business plan objectives with one-third actually out-performing the plan. Over half of the firms surveyed (57%), said that the private equity house added significant value to their business, illustrating the success of this type of financing in the mid-market.

The report looked at the relationship which exists between private equity and mid-market companies and the role that the private equity house plays. A total of 78% of firms found that the private equity house had a good, very good or excellent understanding of their business. However, when the value they offered was analysed this was predominantly in the form of financial and management advice, with only 23% of managers finding they offered operational, product or market support. The benefit of the private equity backing was clear, with head counts in 60% of firms going up, with only 18% of firms losing staff and 22% remaining unchanged.

Richard Moulton, corporate partner at Eversheds, says: “Our report shows that the negative perceptions of private equity houses as highly leveraged asset strippers, who use aggressive hands-on tactics, leading to job losses and short-term gain are wrong. In the mid-market sector we are not dealing with Gordon Gekko’s; the vast majority of private equity houses provide a supportive partnership which enables management to achieve their goals. There will always be points of conflict and disagreement as the firms involved go through an extremely important change in their business life-cycle, but the overall relationships are highly positive and very beneficial.”

A surprising fact from the research is that 20% of firms didn’t consider their exit strategy at the time of going into the private equity deal. “It is clear from our research that companies are going to private equity for support, as they want shareholders who can help them achieve real growth and development of the business for the benefit of all,” says Moulton.