THE PRIVATE EQUITY VALUE REPORT:
Driving growth throughout the UK
Charting the fastest-growing midmarket private equity-backed companies across the UK
Real Deals charts the fastest -growing midmarket PE-backed companies across the UK, in association with BDO
The Numbers
Southwest
Southeast
London
East of England
Midlands
Yorkshire
Northeast
Northwest
Wales
Scotland
Contacts
Thank you for reading
The Private Equity Value Report 2024
“We should never forget where the real magic happens; it’s in the businesses, in the management teams and in their entrepreneurial spirit,” says Jamie Austin, head of global private equity at BDO.
The 210 businesses identified in this report are real-life success stories. Despite the macro turbulence faced in recent years – as one private equity practitioner put it; the neverending cycle of disruption – the private equity-backed companies featured in this report have achieved an average combined Ebitda (earnings before interest, taxes, depreciation, and amortisation) compound annual growth rate (CAGR) of more than 100% between the 2020 and 2022 financial years.
We should never forget where the real magic happens; it’s in the businesses, in the management teams and in their entrepreneurial spirit
These high-growth companies were identified over several months spent analysing deal and company accounts’ data. Through that exercise, 453 UK-based private equity backed companies ‘qualified’, meaning they recorded Ebitda growth between FY20 and FY22.
We determined the top-performing companies by splitting the UK into 10 regions and identifying the highest-growth businesses in each of these regions. Next, we spoke to a selection of portfolio companies and private equity backers to find out how they supercharge growth.
There is no substitute for meeting business owners. You need to meet them to understand them and what their vision is
It is an important time to be focusing on these value creation stories. The geopolitical and economic situation has resulted in some uncertainty for the private equity market in recent years, these success stories bring a much-needed ray of light.
By looking at these companies through a regional lens, what was made strikingly clear is that these high-growth businesses have been supported by houses often with a local presence and knowledge. For a large majority of the top-performing companies, working with a private equity firm either based or with an office locally provided helpful assistance for the deal to go ahead, and support the value creation efforts.
For BDO’s Austin, it is all about trust. “Trust is so important. A private equity deal is a complicated thing to do – there are so many moving parts. So, businesses need to build a bridge of trust between them and the private equity house. Private equity money is all very similar and it is seeking a very similar return. What’s different is the people and how they are deploying their money; their strategy. Trust is important, so being local is important as it builds trust, which means you can build relationships; there’s a human connection that makes it less risky.”
Austin also points out the role of local advisers in building relationships and trust. “We sit between the entrepreneurial mindset and the institutional mindset of having to do things in a certain way. The local adviser acts as an interpreter between those mindsets. That builds trust because no one wants to do this alone or with someone they don’t have faith in.
BDO tax partner Catherine Jones agrees: “Private equity relies on having a good flow of businesses to invest in. There is no substitute for meeting business owners. You need to meet them to understand them and what their vision is – to understand where that business has come from is so important in planning how they go forward.”
Building a great management team, a strong second team and a good staff base is paramount to keeping a business on its journey
As well as employing a local approach to sourcing and executing deals, what is also evident from the cohort of high-growth companies featured in this report is the sector focus of their private equity backers.
“A private equity house that has experience of a sector, then has the ability to bridge the gap between the entrepreneurial and institutional mindset. Some funds are doing a really good job of this; they have really deep-dived into sectors, which means they can bring a richer set of solutions to the table and are quicker to add value,” observes Austin.
One of the key value creation levers evident right the way through this report is private equity’s expertise in strengthening management teams and revving up recruitment engines. This has been of particular importance in recent years, given the tightening of labour markets and subsequent wage inflation.
But perhaps private equity’s greatest weapon when it comes to growth outperformance is buy-and-build. Indeed, the majority of companies analysed throughout the report have conducted some level of M&A activity. For BDO’s head of transaction services, Derek Neil, acquisitive growth strategies are now feeding into deal execution. “We’re seeing private equity firms going into platform investments with the buy-and-build targets already lined up; it’s winning over management teams in competitive processes as it demonstrates an understanding of the market and evidences the potential the value story.”
Another key facet of private equity’s value creation expertise is operational improvement, and this was clearly a sought-after requirement of many of the companies we spoke to for this report. Says Austin: “That’s where the choice of private equity firm becomes really crucial; they must have empathy and deploy value creation strategies in the right way.”
And it would appear that the value creation toolkit is expanding. Says Neil: “The more challenging economic conditions focus the mind on other levers that can be pulled. AI can be paralysing for businesses; it raises question marks over who to hire. My sense is that businesses that are getting their heads around AI are feeling empowered, they’re looking at optimisation and how to automate processes to drive efficiency. That is a great PE value creation story, if private equity can take the learning about AI from one portfolio company and apply it to the rest of its portfolio.”
BDO audit partner James Newman echoes this sentiment: “Building a great management team, a strong second team and a good staff base is paramount to keeping a business on its journey. But it’s also about keeping an eye on the market and embracing changes, whether that’s better tech or AI. It’s about the focus on delivering against strategy, as well as on what is changing – being flexible and responding to that.
"What’s really interesting is a lot of these high-growth businesses have had very adaptable management teams who were able to steer through the volatile times in recent years.”
The operating partners and value creation teams have been put to good use over this period, which has probably led to more diversity within private equity firms themselves
Clearly, as this report evidences, there is much to be positive about; the ways in which PE is sourcing deals, the partnerships and trust created, and ultimately these amazing success stories of growing companies.
But private equity’s reputation continues to be a sticky issue. Says Austin: “Private equity’s image and reputation is getting better but there is still scope for better education and improved relationships with businesses, government and the media. Fundamentally, private equity plays a hugely important role in providing funds and expertise to enable entrepreneurs to thrive. The sector could do more to help itself by focusing on this as its core purpose and making its case in an authentic way.”
According to Sarah Ziegler, head of private equity coverage at BDO, the increased focus on value creation by private equity firms is already speaking to a more authentic approach: “The operating partners and value creation teams have been put to good use over this period, which has probably led to more diversity within private equity firms. They’ve had to harness different skillsets rather than rely on deal-doing. That’s allowing for different voices in private equity firms to be heard more.”
Looking back at a challenging period for deal-doing, it is hugely encouraging to see the ways in which private equity firms have been working with their portfolio companies to drive increased value, revenues and employee numbers.
Austin is optimistic about an improved market for new deals: “Unless we see something unexpected such as a geopolitical event that creates more risk, we're expecting the market to start moving again. My advice to entrepreneurs is to start thinking about putting their business on the market early in the year so they can get a deal done before the summer, or be ready for September and look to wrap up before Christmas.”
“For entrepreneurs, private equity not only provides expertise – someone who has done this multiple times – but also someone to walk alongside you, to pull you up, to give you ideas and to support you."
Derek Neil, Head of Transaction Services, BDO
Supply chain resilience
Attracting and retaining skilled staff
Integration of new technologies including AI
High interest rates and/or borrowing costs
Higher operating costs overall (e.g. commercial rent, energy bills, payroll)
Domestic economic uncertainty
International growth
