We'll be unveiling the 12 firms and portfolio companies that topped our Operational Excellence Awards on Monday.
When we first launched these awards five years ago, the idea was simple enough: celebrate the best value creators in the business. As we wrote in the opening letter to the 2012 Operational Excellence Special, value creation is “the industry's best route both to outsized returns and reputational redemption”.
It was true then, and it's true now, perhaps even more so. The intervening five years have been characterised by low interest rates and low growth, causing fierce competition for assets and, subsequently, high prices.
The ability to implement and demonstrate genuine – and repeatable – operational improvement has increasingly become a “must-have” for general partners and our Operational Excellence Awards show just how far the industry has come. There's still work to be done, but it's worth taking a moment to celebrate how much has been achieved.
“Given the increasing importance of the private equity industry as business owners in many countries, I think the industry could benefit from being more open about its investments and value creation,” Jan Radberg, head of private equity at AP Fonden 1, the first Swedish national pension fund, told PEI.
“I think that private equity has many good and successful stories to tell, which may not always come across to all stakeholders.”
And our winners certainly tell those stories: across our 12 winning case studies, 3,900 new jobs were created. The portfolio companies span a broad range of sectors, from healthcare to industrial to consumer goods to technology to logistics. They include at least two companies that, were it not for private equity investment, probably wouldn't exist today.
And they performed extremely well for their investors, delivering an average return of more than 5x.
Our winners also highlight that there's more than one way to skin a cat; across the industry, managers are creating value in many different ways. PEI is currently running a research project to gain deeper understanding of these methods, how operating partners themselves are responding to the evolution of the role and how the value of the function is measured and understood.
Take part in the Operating Partner Survey 2016 before 7 October to receive a free copy of the results.
Picking this year's winners was far from straightforward for our panel of distinguished independent judges.
As Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago's Booth School of Business, put it: “This was a much more difficult year than any of the previous years. Almost all of the nominated deals would have been winners in previous years.”
Look out for the announcement of our winners on Monday, and a big thank you to all those that submitted their value creation stories.
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