New Private Equity Council white paper details PE’s role in driving economic growth and investment
WASHINGTON, DC, July 11, 2007 — Private equity is an integral part of the American economy that significantly strengthens companies and contributes hundreds of billions of dollars in profits to pension funds, university endowments charitable foundations and other private equity investors, according to a new white paper released today by the Private Equity Council.
The report, “Public Value: A Primer on Private Equity,” is a reader-friendly introduction to the world of private equity that draws on independent research and real-life examples to describe how private equity investments build better companies and strengthen retirement funds, endowments and foundations, which together represent the single largest group of private equity investors.
The white paper was posted today on the Private Equity Council’s new web site at www.privateequitycouncil.org. In addition to the “Public Value” report, the PEC web site offers access to a wide range of information about the contributions that private equity investment firms make to the national and global economies. The site includes fact sheets, position papers, press releases, backgrounders and links to other private equity-related web sites.
“Private equity has proven itself to be a powerful engine for creating economic value for investors, for retirees, for many workers and for institutional investors — including universities and foundations that are better able to meet their educational and charitable objectives as a result of their private equity investments. Moreover, the role PE firms play in improving the performance of companies of all kinds in all sectors increases productivity and competitiveness,” the report concludes.
Statistics cited in the “Public Value” report show that private equity firms returned $430 billion in profits to their limited partner investors between 1991 and 2006 and that private equity investments substantially outperformed the public equity markets during the 25-year period beginning in 1980. During that period, top-quartile private equity funds generated annualized returns to investors of 39.1 percent, while the Standard & Poor’s 500 index posted average annual returns of 12.3 percent.
The report also cites research by Professor Josh Lerner of the Harvard Business School and Professor Jerry Cao of Boston University that concluded that companies that went public again after being acquired by private equity firms and operated by them for more than a year consistently outperformed the public equity markets and other IPOs.
“This report makes a compelling case that private equity firms play a critical role in creating real economic value for the companies they acquire, for the consumers those companies serve and for the pension funds, universities, charities and other institutions that invest in them,” said Private Equity Council President Douglas Lowenstein. “We hope this report will make clear that private equity is neither a dark force nor a silver bullet, but instead an important tool for driving growth and investment in the American economy.”
“Public Value” describes in detail how private equity investments work, how private equity firms generally return 80 percent of investment profits to their limited partners and how private equity firms build stronger companies. The paper uses the real-life examples of companies such as Dunkin’ Brands, which owns Dunkin’ Donuts and Baskin-Robbins, and SunGard, a major software developer and vendor, to make the point that private equity firms today rely on deep expertise, a performance culture, unique managerial capabilities and nimble ownership structures to drive performance improvements at the companies they acquire.
The report quotes Dunkin’ Brands CEO Jon Luther’s testimony before the House Financial Services Committee, in which he said: “The benefits of our new [private equity] ownership to our company have been enormous. Their financial expertise…enabled us to make significant investments in our infrastructure and our growth initiatives…They have opened to the door to opportunities that previously were beyond our reach.”
The report is available in PDF format on the PEC web site. Hard copies can be obtained by contacting the PEC at 202.652.2330.
About The Private Equity Council
The Private Equity Council, based in Washington DC, is an advocacy, communications and research organization that develops, analyzes and distributes information about the domestic and international private equity industry. Its members are: Apax Partners; Apollo Advisors; Bain Capital; The Blackstone Group; The Carlyle Group; Kohlberg, Kravis & Roberts; Hellman & Friedman; T.H. Lee Company; Providence Equity; Silver Lake Partners and TPG Capital.
