Does Private equity investment positively impact on firm performance and on the growth of a local economy?

This paper analyzes and measures company performance due to private equity investments in a local economy. Our research aim was to explore in detail whether private equity investments impact profitability variables, and enable businesses to grow and become more efficient. For this purpose, a database of unquoted private equity backed companies in Italy was created. Our analysis suggests that private equity investments have, on average, a positive effect on firm profitability and company growth. The performance of private equity backed companies is higher in more cases than that of firms without private equity backing in the second year after the acquisition. Private equity investments lead to growth in Ebitda and have positive effects also on equity and in the number of employees. However, the effects on profit are mostly negative, while effects on sales are ambiguous.