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News & opinion

Private equity boosts innovation, productivity and competitiveness

29 May 2013

A new report has shed light on how private equity can help boost European economic growth.

The independent report, by Frontier Economics for Invest Europe, brings together the results of over 60 academic studies and uncovers new findings on how private equity drives innovation, productivity and competitiveness in Europe.

The report finds that private equity-backed companies are more innovative. When private equity gets involved in a company, patent citations for new products jump by a quarter.

That innovation can help give Europe a competitive edge and encourage growth. The patents developed by private equity funded businesses in Europe between 2007 and 2011 are judged to be potentially worth  €350 billion.

Private equity also attracts much needed foreign investment while boosting productivity.

In the 12 largest private equity markets in Europe, private equity invested almost €250 billion in more than 19,400 companies between 2007 and 2012. Of this, about €50 billion, a quarter was raised from outside Europe.  At a time when banks are less able or willing to lend, private equity investment is providing an alternative source of finance to growing companies.

The report explains how private equity firms work with the companies they back to boost productivity by improving management, operational expertise and other processes.

It shows how it can help build a funded company into a better business and encourage it to expand into new, international markets.

One of the most encouraging findings is that private equity contributes to the creation of up to 2,800 new businesses in Europe each year. That in turn has a spill over effect that inspires entrepreneurs to create approximately another 2,800 new companies each year.

There is still more academic research needed to fully establish the economic impact of private equity but we, at Invest Europe, hope that this report provides a welcome contribution to an important debate.

Vincenzo Morelli, Chair 2012-2013, EVCA

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