Why Private Equity-Backed Companies Outperform in Competitive Markets

Many businesses lack the resources and business acumen necessary to thrive in their fields, which places them at a strict disadvantage in highly competitive markets. Private equity (PE) backing can be advantageous for such companies, giving them the financial resources and strategic expertise to enhance their operations, facilitate rapid growth, implement cost-cutting measures, and make strategic acquisitions.

These abilities can help businesses outperform their competitors even in extremely challenging market environments. Furthermore, being backed by a PE firm allows companies to implement a potentially more profitable long-term strategy compared to public market investments that tend to prioritize short-term gains.

As the President and CEO of the PE firm, Westbridge Capital Ltd., Michael Meekins has a keen insight into the value that PE provides to companies competing in crowded business sectors. His extensive experience in finance has given him a thorough understanding of why PE-backed businesses thrive in the face of stiff competition.

Benefits of Private Equity in Competitive Markets

Private equity provides businesses with access to substantial capital, allowing them to expand, invest in innovation, and strengthen their market position. Just as importantly, PE enables businesses to weather economic downturns and navigate credit negotiations effectively, both of which can be very advantageous in competitive markets.

Let's take a closer look at how PE can help companies outperform their competitors:

Enhancing Business Resilience

Research from the University of Glasgow and the University of Leeds found that during the pandemic, PE-backed firms outperformed industry peers in sales, employment, and earnings. These companies not only survived but thrived, increasing growth despite economic collapse.

These findings suggest that private equity support enables faster restructuring and reduces bankruptcy risk. Furthermore, PE-backed firms liquidate up to 20% less often than non-PE-backed counterparts, resulting in more stable long-term outcomes.

Securing Better Credit Terms

PE-backed firms proved more agile than non-PE peers, benefiting from investor support in navigating financial challenges. This is because private equity backers can use their networks and expertise to negotiate with creditors more effectively, avoiding lengthy court proceedings.

Research from the Federal Reserve Board of Governors found that PE-backed firms secured better lending terms and were more likely to restructure rather than liquidate. This highlights private equity's role in ensuring favorable financial outcomes and providing businesses with critical stability during economic uncertainty.

Fostering Sustained Growth and Financial Resilience

Private investment drives long-term growth, improving operations, market share, and productivity even after investors exit. Researchers at the University of Leeds reveal that PE-backed firms continue outperforming non-PE peers, with lasting gains in efficiency and performance.

Increased productivity amply demonstrates private equity's enduring impact. By enhancing competitiveness and resilience, private investment leaves businesses stronger than before, ensuring they are well-positioned for sustained success in their industries long after private equity involvement ends.

Leveraging Growth in a Competitive Field

Michael Meekins' extensive experience in the financial sector has given him a unique insight into how PE backing enables businesses to thrive even in a highly competitive business environment. From increasing resilience to giving companies the ability to weather economic difficulties, these strategic investments provide a solid foundation for long-term success.