Did Private Equity-Backed Firms Outperform Operationally During Covid-19?

Abstract: Do private equity (PE) backed companies perform better operationally in a non-financial crisis? By analyzing PE-backed firms in the UK during Covid-19 using fixed effects difference-in-differences, our findings suggest that private equity-backed companies' performance decreased significantly more at the onset of the crisis and increased their leverage but recovered faster both with greater magnitude and significance. PE-backed companies thus seem to handle an operationally-sided crisis better over time but are more exposed to them initially. In conclusion, private equity adds value operationally, but it is not without tradeoffs in terms of risk.