Score One for Private Equity: PE-Backed IPOs Outperforming Others
There’s only one true way to settle the age-old “Is private equity a positive force” question, and that is to look at the performance of PE companies after the exit. Assuming the buyout firm made a profit for itself and its investors, the real test lies in a portfolio company’s post-PE lifetime. It's simple. If the company is leaner, more competitive and stronger than it was before private equity intervened, then the LBO detractors have no case. If it is so crippled with debt and stripped to its bare bones that it struggles or fails, then maybe they’re right. There’s not much comprehensive data on this topic, but today, the Wall Street Journal published a slice of evidence that paints private equity pros as the good guys. A story titled “Private Equity IPOs Outperforming Others” cites data that shows, between 2003 and 2008, PE-backed IPOs in Europe have performed better than their non-PE-backed counterparts.
