State of the Union: Private Equity is Building Better Businesses Across America

New Pitchbook Report Shows “Buy and Build” Drives Competition, Reduces Cost for Consumers

WASHINGTON, D.C. –  In advance of President Biden’s State of the Union Address, the American Investment Council and PitchBook released a new report highlighting how private equity contributes to the American economy and drives competition. The report – Building Competition: How Buy-and-Build Helps the American Economy – explores the industry’s buy-and-build model, which investors use to acquire several smaller companies to create a new, more competitive business.

The results of the buy-and-build model are companies that are stronger and better organized for their employees; provide better goods and services at a lower price for their customers; create more channels of growth for the companies themselves; and generate higher returns for long-term investors, such as public pension plans for public servants and retirees.

  • “Private equity’s buy-and-build model is just one example of how our industry is fueling the economy, creating jobs, and building better businesses nationwide,” said Drew Maloney, AIC President and CEO. “The State of the Union Address is always an important opportunity to take stock of the American economy and appreciate the important role that private capital plays across our country.”  

Additional key findings from the report include: 

  • Today, about 78% of majority private equity transactions are add-ons – and the majority of investments are in a handful of fragmented industries with no dominant players and virtually no risk of monopolization.
  • In most cases, private equity firms consolidate local companies into regional, more competitive businesses – which helps drive down costs for their customers.  Among private equity-sponsored companies that acquire other companies, almost 90% have acquired businesses in another state.
  • The buy-and-build model is often guided by operating partners – typically former CEOs or COOs of major companies – who have extensive experience with acquisitions and integrating new products and services into a larger organization and provide invaluable expertise.
  • Private equity has created new insurance markets, streamlined healthcare costs and expanded access to urgent care in rural communities. Other fragmented industries for the buy-and-build model include construction, management consulting, waste management services and IT consulting.

Private equity is supporting the American economy and investing in critical issues, including: 

  • Infrastructure: Private equity is financing, managing and accelerating the completion of critical infrastructure projects, including those supported by the Infrastructure Investment and Jobs Act. Private equity investment in U.S. infrastructure surged to a record $45 billion in 2022.
  • Life Sciences: Private equity is playing an increasingly important role in the growth and continued strength of the life sciences industry. In the last decade alone, private equity has invested $280 billion across more than 1,800 life sciences and medical device companies in the U.S.
  • Small Businesses: In 2022, 62 percent of all private equity went to small businesses in the U.S.

Private equity also delivered the strongest returns for public servants’ retirements. In 2021, private equity investments delivered a median annualized return of 15 percent over a 10-year period for public pension funds across America that partner with private equity – a greater return than any other asset class

The full report can be found here.