Chinese PE-backed companies have more positive social impact than listed firms

The study compared 100 companies that received at least $20m US private equity investments between 2002 and 2006 with 2,424 publicly listed companies having major operations in China to determine their social impact.

The results of the study show that private equity firms support the development of inland provinces, contribute to foster domestic consumption, transfer management know-how to businesses in their portfolios and improve corporate governance. The study further shows that private equity-backed companies in China had a job creation rate 100 per cent higher and a profit growth rate 56 per cent higher than their publicly-listed peers during the study period of 2002 to 2008.

The survey, conducted by Bain & Company and the PE and Strategic Mergers & Acquisitions Working Group of the European Union Chamber of Commerce, also found that private equity-backed companies spent more than two-and-a-half times that of their publicly-listed counterparts on R&D.

Reflecting on their relatively stronger financial performance, private equity-backed companies yielded tax payments that grew at a 28 per cent rate compounded annually, ten percentage points higher than their benchmark peers in the study.

Andre Loesekrug-Pietri, chairman of the European Chamber’s PE and Strategic M&A Working Group, said, “China has emerged as one of the leading destinations for private equity capital. This trend is continuing through the current turbulence.”

China is generating lots of interest in the private equity industry, with major firms setting up yuan-denominated funds in the country. Earlier this week Carlyle, the second biggest buy-out house, announced that it has signed a memorandum of understanding with Beijing city authorities to establish a fund there, to be known as the Carlyle Asia Partners RMB Fund.

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