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Private equity positively influences key drivers of European economic growth

Frontier (Europe) has today published a report for the European Private Equity and Venture Capital Association (EVCA) exploring the economic impact of private equity in Europe.  The report finds that private equity contributes to the creation of up to 5,600 new businesses in Europe annually and attracts significant investible funds into Europe, providing much needed risk capital for businesses.  Between 2007 and 2012, private equity invested almost €250bn in the 12 largest private equity markets in Europe,  of which an estimated €50bn was raised from outside Europe. 

The report also identifies positive impacts on productivity, by improving management, operational expertise and production processes.  Private equity is linked to a 6.9% increase in earnings before interest tax, depreciation and amortisation per employee in large private equity-backed companies.  It also builds businesses that are more innovative:  patents granted to private equity-backed businesses between 2006 and 2011 are likely to be worth up to €350 billion.  Private equity participation can increase the number of patent citations by up to 25%.  With increased numbers of citations corresponding to greater economic value, this suggests it uses resources more effectively to deliver higher returns on investment. 

Commenting on the findings in the Daily Telegraph, Jose Carbajo from Frontier said: “This report helps to identify and quantify the contribution of private equity to economic prosperity in Europe, through systematically tracking the effects associated with more innovation, operational improvements, productivity gains and increased exports.  The broad base of evidence highlighting the linkages between private equity and these impacts suggests such activities can make a vital contribution to accelerating growth in Europe.”

 

For more information, please contact Paul Cullum at p.cullum@frontier-economics.com or call +44 (0)20 7031 7000.

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