Home >> Resources >> Blogs >> Market Insights >> Study Shows Companies Owned by PE Groups Faired Better than Others During the Recent Recession
08 Apr |
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| Companies backed by private equity groups weathered the most recent recession much better than comparable businesses, according to a new study by the Private Equity Council (PEC). According to Douglas Lowenstein, President of PEC, "This study is an important contribution to an informed discussion about private equity ownership. The low default rate is another indicator that undercuts popular myths about private equity ownership and suggests that private equity firms are effective at steering companies through troubled times." A free copy of the study is available by clicking on the link at the end of this article.
The PEC study found that the default rate for the more than 3,200 private equity-backed companies acquired between 2000 and 2009 and held through 2008-2009 was 2.8% during the two-year recession. That compares very favorably to the 6.2% annualized default rate for other businesses. These findings are consistent with a number of other studies, including a 2008 report by the Bank for International Settlements and a 2009 study by Steven Kaplan, a professor at the University of Chicago and Per Strömberg, a professor at the Stockholm School of Economics. Interestingly, the PEC findings contradict the forecasts made by credit rating agencies Moody's and Standard and Poor's and by the Boston Consulting Group who predicted that the default rate for private equity-backed companies would rise significantly during the recession. The Boston Consulting Group in 2008 predicted that nearly 50 percent of the world's private equity-backed companies would default in three years. According to the PEC study this was not the case. The PEC report is based on data from 3,200 U.S. companies that were acquired by private equity groups between 2000 and 2009 and held through the 2008-2009 recession. The Private Equity Council is a research, advocacy, and communications organization established to collect, analyze and distribute information about the private equity industry and its contributions to the national and global economy. The Private Equity Council study is available in PDF format at www.privateequitycouncil.org. |
