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Three real world examples of the value-creating powers of private equity

At their core, private equity trusts like NBPE create value by supporting growing companies - here, we discuss three such companies and how the investments worked...
Kepler Trust Intelligence
Last update 04 March 2020

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by NB Private Equity Partners. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

With the number of companies staying private growing every year, and a clear diversification benefit on offer, the case for private investors to consider a private equity allocation is compelling. Listed private equity (LPE) trusts offer investors access to this asset class – but as we have discussed in detail, not all LPE trusts are made equal.

By co-investing with other private equity sponsors or managers, NBPE has access to a vast array of deals, spread across different sectors and geographies, with Neuberger Berman’s scale meaning that it sees an especially high number of private equity opportunities each year from which it can select the most attractive. Many of the companies in its portfolio are very different in nature to those available in public markets.

While NBPE focuses on direct equity co-investments, NBPE’s private equity deals can vary quite considerably. The size of NBPE’s investment can generally range between $5 million to $25 million in companies which might be considered small & mid-cap when compared to listed markets. By co-investing alongside other private equity managers, largely on a management fee and carried interest free basis , shareholders stand to benefit from their  efforts to improve business operations through ‘active ownership’, where the sponsor advises on or can even get involved in the management of a business to drive growth.

Here, we discuss three of the most recent private company exits (two announced and pending close and one closed) which are expected to produce aggregate returns above the weighted average gross multiple of invested capital of 2.5x that NBPE achieved from 2019 exits, the reasons NBPE invested in the first place and the exit outcome, demonstrating the various life cycles of private equity deals. Whilst NBPE’s investments won’t necessarily always result in such strong returns, we hope to illustrate the variety of businesses represented in the portfolio and the various methods by which value is created, and ultimately crystalised through an eventual sale.

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