The American Investment Council (AIC), working with PitchBook, released a new report that examines private equity’s growing investment in “carveouts.”
Carveouts are transactions involving non-core assets, or under-resourced or misaligned business units within larger companies. The report, called “Diamonds in the Rough: How PE Breathes New Life into Unloved Businesses,” looks at how private equity has been successful in taking these units – which may have struggled as part of the larger business – and providing them with the resources they need to succeed on their own.
It found that private equity firms invested over $119 billion to carve out nearly 600 new, standalone companies in 2021 alone. This represents a 52 percent increase from 2020. Over the past decade, private equity firms have invested over $700 billion and carved out over 4,000 new, standalone companies.
“Private equity’s calling card is fixing companies. This report shows how the private equity industry is breathing new life into undervalued and misaligned businesses nationwide at a record pace. This is yet another example of how the private equity industry is investing in America, strengthening and scaling promising businesses, and saving jobs throughout the country,” Drew Maloney, AIC president and CEO, said.
Looking at different sectors, private equity has invested $220 billion into the business products and services industry since 2012 and over $30 billion in 2021 alone, the report said. In manufacturing, private equity has invested $170 billion over the past decade, despite setbacks in U.S. manufacturing caused by disrupted global supply chains and the COVID-19 pandemic. Also, private equity has invested over $120 billion into the renewable energy sector as part of its carveouts strategy. It has also closed dozens of innovative deals with leading software companies such as Dell Technologies, Intuit, and Compuware.
The report also features several case studies of creative carveouts, including Discovery Education, GE Lighting, Core & Main, and Evoqua Water Technologies.