The World Economic Forum Report Shows That Private Equity-Owned Companies Are Better Managed And More Productive

According to a new report released by The World Economic Forum, private equity backed companies are better managed than government, family or privately owned firms and have a productivity growth two per cent greater than average. The Global Economic Impact

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According to a new report released by The World Economic Forum, private equity-backed companies are better managed than government, family or privately-owned firms and have a productivity growth two per cent greater than average.

The Global Economic Impact of Private Equity Report 2009 examined management practices across 4,000 private equity-owned and other firms in a sample of medium-size manufacturing firms in 12 countries in Asia, Europe and the US.

The study found that, on average, private equity-owned firms are the best-managed ownership group. They are significantly better managed across a wide range of management practices than government, family and privately-owned firms.

Firms acquired by private equity groups experience productivity growth in the two-year period after the transaction that is, on average, two per cent higher. About 72% of the outperformance differential reflects more effective management of existing facilities, whilst 36% of the differential reflects the productivity contribution of more entry and exit at target firms, the WEF found.

The study also focused on private equity investments in emerging markets. From 2004 to 2007, the dollars raised by funds investing in the emerging economies of Asia, Russia and the former Soviet Union, Latin America, the Middle East and Africa has increased between eight and 30 times.

The World Economic Forum is an independent international organisation committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Established in 1971, and based in Geneva, Switzerland, the WEF is impartial and not-for-profit.

D.C.

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