‘Buy and build: rhetoric or reality?’ asked UK mid market investor PPM Ventures in January in a specially commissioned market survey. The key conclusion was as stark as it was unexpected: the survey “revealed a surprising degree of ‘absentee parenting’ on the part of private equity owners, in the eyes of their portfolio companies.”

PPM's findings, based on interviews with 20 private equity backed companies, 20 intermediaries and 20 FTSE 350 corporations, showed that 47 percent of the portfolio companies polled felt their owners were not managing them actively. Also, where these companies had made add-on acquisitions over the past six years, 79 percent said they had initiated these themselves, not their private equity backers.

The survey, which prompted newspaper coverage in the UK portraying private equity as (once again) on the back foot, struck a nerve with the industry. Unsurprisingly so: in today's market, where financial expertise alone no longer makes for a compelling investment case, private equity is about active, hands-on portfolio management. The ability to make money by exercising control over its assets is fundamental to the industry's claim to superiority over public market ownership. A knack for buy and build, preferably across borders, is also a standard item in its marketing repertoire.

So it would be embarrassing to the industry if all of this were found to be more talk than substance. However, the survey does not prove that too often the emphasis placed by UK private equity firms on active portfolio management is little more than lip service.

For a start, even a large minority is still only a minority: 47 per cent of portfolio company managers described their owners as inactive, but another 53 per cent didn't.

This may seem trivial, but it does in fact lead on to something quite important. What the survey doesn't appear to have asked is this: what proportion of added value, realised or otherwise, in their private equity owners' overall portfolios did the companies account for that described these owners as active and instrumental in a buy and build effort? And how are the companies performing who gave their managers bad grades?

In 2002, research published by McKinsey and based on an analysis of 18 top quartile buyout funds between 1993 and 2001 showed that on average, the top two investments by IRR of these funds accounted for 44 per cent of their total return even though these transactions represented less than 10 per cent of the number of deals done and just 17 per cent of capital invested.

McKinsey didn't say whether more managerial effort had gone into the star investments than into the less impressive ones. But it is hard to imagine that this was not the case, even if one accepts that in some instances, luck will also have played a major role.

What this points to is that although limited partners may not like it, home runs do have much to do with a private equity fund's overall success. More fundamentally still, no manager is likely to ever build a portfolio of equally successful performers. One conclusion that the PPM results give rise to is that they may not even be trying. Is that disappointing? Perhaps it's simply pragmatism. General partners will prioritise their most promising bets.

As for the fact that four in five portfolio company managers declined to give their investors credit for launching a successful add-on acquisition: may this need a pinch of salt too? CEOs have egos: they may say a winning idea was entirely theirs, but that doesn't necessarily make it so.

Finally: when publishing the results, PPM provided three examples of successful investments of its own, where it has helped execute an acquisition strategy: Barracuda, Gala Group and Astron Group. The firm will have chosen these examples with care, and there is nothing wrong with that. But, as you might guess, some competitors were quick to point out that they too could produce from their portfolios evidence of active, value-adding investment management with a buy and build component. They could be forgiven for finding this part of PPM's research effort just a little self-serving.