Private equity-funded firms top growth charts

Published on Thursday 27 September 2007 11:57

COMPANIES owned by private equity firms grew faster in value last year than publicly listed ones, a new study revealed today.

The study by Ernst & Young said their growth was down to their management choices, quick decision-making and selective approach to buying. The findings will add to the debate about the merits of private equity firms, which many investors, politicians and trade unions oppose amid claims that they are ruthless asset strippers who slash jobs.

It comes as Prime Minister Gordon Brown signalled an end to the tax loophole enjoyed by private equity companies. He is expected to announce the clampdown, which will increase the tax paid by the firms, in the forthcoming pre-budget report. In response to a question from a trade union official, Mr Brown said: "Whenever there is a loophole that shouldn't exist, we take action. On this issue of private equity, I can assure you that we will do so."

The E&Y study appears to support the role of private equity firms, saying two-thirds of their earnings growth comes from business expansion. In the UK, France and Germany, employment at firms owned by private equity groups grew by an average of five per cent, compared to three per cent for public companies.

Simon Perry, E&Y's head of global private equity, said: "Across almost all deals and ownership strategies, private equity investors were actively involved in the business after acquisition, making rapid decisions alongside management, challenging progress and making available specialist expertise."