PERG | UK Private Equity Annual Public Reports

UK Private Equity Annual Public Reports

Highlights from this year’s PERG reports

  • Walker portfolio companies continued to produce additional disclosure in their audited financial statements, with 60% doing so to at least a good standard and the remaining 40% doing so to a basic standard. (2021: 60% versus 67%).
  • The quality of disclosure of non-financial KPIs remains unchanged compared to last year, although notably the quality and depth of the disclosures in relation to environmental matters has improved.
  • The majority of disclosures in respect of social, community and human rights issues and around financial position are basic and should be a focus of improvement next year.
  • All BVCA members in scope included information on their website about themselves, their investors and their portfolio companies.
  • The vast majority of portfolio companies upheld their transparency requirements and published annual reports and mid-year updates in a timely manner (2021: 78% and 86% respectively).
  • Walker portfolio companies outperformed the public company benchmarks at a revenue increase of 7.8% versus 2.3%, and an EBITDA increase of 6.0% versus 5.6% per annum respectively.
  • Capital productivity increase in Walker portfolio companies exceeds public company benchmarks at 10.1% versus (1.9)% growth per annum (2021: 10.7% versus 0.4%).

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Published 20 February 2023

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Invested for the long term

  • The average timeframe of private equity ownership of portfolio companies is 5.9 years and the current portfolio companies within scope of the Walker Guidelines have been owned for an average of 4.2 years.

Invested in people

  • The portfolio companies within scope of the Walker Guidelines are some of the largest businesses in the UK, employing over 291,000 employees across the country.
  • Private equity’s investment in employees typically increases both year on year and over the duration of private equity ownership. Average employment cost per head increased by 7.7% in 2021 compared with 2020, higher than the long-term trend and the UK private sector benchmark of 4.6% growth over the same period.

Backing and building British businesses

  • Partial divestment continues to be well below the figure for acquisitions: 57% vs 10%.
  • While the 2021 YoY revenue growth of portfolio companies in this report lags 2019 levels due to the continued impact of the Covid pandemic, we still see strong growth across 2021 compared to 2020. This implies that even in uncertain times, private equity stewardship resulted in successful businesses.
  • Portfolio companies outperformed the public company benchmark on long term revenue and EBITDA growth on a reported basis.

Generating returns

  • Equity return from Walker portfolio company exits in the last 15 years is 3.0x the public company benchmark. Around 60% of the additional gross return can be explained from the higher levels of financial leverage employed, with the balance being private equity strategic and operational improvement.

Using debt to fund acquisitions

  • Across the total Walker portfolio, the debt ratio averaged 6.6x at the time of initial investment by the PE and 6.9x at the latest date or exit, indicating that while debt has grown under private equity ownership it is at a marginally higher rate to growth in profit.
  • By sector, debt has reduced under private equity ownership in all the consumer, healthcare and technology sectors (see EY report for full details).
  • Debt levels applied to portfolio company investments are typically higher than public company benchmarks. 61% of portfolio companies have a debt-to-EBITDA ratio – a common feature of profit – above 5x, versus 22% of publicly listed companies.