Companies owned by private equity and venture capital grow twenty times faster than others
Companies that own private equity investors (PE investors) clearly grow faster than comparison companies, according to a recent impact study of the private equity industry by PwC and the Finnish Private Equity Association (FVCA). The growth was very strong both in terms of turnover and the number of employees.
According to the impact study, the annual turnover growth of venture capital investors’ target companies within three years of the first investment is eight times faster than in the comparison group, which was collected from companies of the same size operating in the same industries. In companies with a venture capitalist behind them, the growth is 45%, while the growth in the comparison group is 6%.
PE investors invest in unlisted startups and growth companies and own either a majority or a minority stake in the company. The ownership period is typically 3–7 years, during which they help companies grow as active owners. After this, the capital investor leaves the ownership and the company moves to the next stage of growth, for example by listing on the stock exchange.
“In addition to the well-known Wolt, Supercell and Musti and Mirri, PE investors have been involved in accelerating the growth of several companies in Finland. Currently, more than 600 growth-oriented companies have PE investors as owners, and new target companies are constantly being sought,” states Jussi LehtinenPwC partner who has been responsible for the study.
The number of personnel in the target companies of the main investors increases up to 20 times compared to comparison companies. The annual growth measured over three years is 39% compared to 2% for comparison companies. At the same time, the target companies’ turnover per employee more than quadruples in a year compared to the comparison group.
“Most of the increase in the number of personnel comes from the fact that new jobs are created as the company’s operations grow, but acquisitions are also part of the capital investors’ strategy. This group of fast-growing companies would often also want to recruit more. , but there is a shortage of skilled labor in both startups and growth companies”, says Jonne Kuittinenwho is responsible for research at FVCA.
Skilled capital accelerates economic growth
PE investors invest the funds they collect in companies outside the stock exchange. At the end of 2021, the combined turnover of venture capitalists’ target companies was more than 20 billion euros, which is about five percent of the turnover of all Finnish companies. At the same time, approximately 76,000 people worked in target companies in Finland, which corresponds to approximately five percent of the workforce of all companies in Finland. In addition, the target companies of Finnish capital investors employed around 18,000 people abroad.
The availability of know-how has also been identified as a key area for Finland’s growth report Published last year by the sustainable growth working group established by the Minister of Economic Affairs Mika Lintilä. According to the report, in order to ensure the availability of capital investments, it is necessary to think about ways to increase the interest and opportunities of both domestic and foreign LP investors to invest in Finnish capital funds.
Through private equity funds, venture capitalists invest in Finland’s most promising growth companies.
“The results of the report show once again that private equity investors accelerate the growth of Finnish companies with skilled capital and create sustainable prosperity in Finland. An owner group that strives for bold growth has a significant social impact. It is especially emphasized in such a market. A situation where growth may otherwise slow down and productivity development is sluggish”, states the CEO of FVCA Pia Santavirta.
HT
Source: PwC/Strategy& and the Finnish Capital Investment Association