drxDATA INSIGHTS: Chairs play key role in value creation, research finds

November 6th, 2019

drxDATA INSIGHTS: Chairs play key role in value creation, research finds

Private portfolio businesses which have a Chair are significantly more likely to achieve a successful exit than those that do not, drxDATA research finds.

A survey by drxDATA of all 252 exits achieved by UK private equity backed businesses in 2018/2019 found that 62% of PE backed businesses had a Chair at the time of exit, while 71% of PE backed businesses achieving the best exits in the upper quartile had a Chair.

drxDATA analysed the differential rates of returns that each of these types of Chairs achieved within the marketplace in order to understand the potential value creation role that a Chair can bring to a business throughout its hold period.

The research also found that the most successful businesses were more likely to have an independent Chair, which did not have a pre-existing relationship with either the PE fund or the portfolio company, compared to all businesses achieving exits. It found that Independent Chairs were 18% more likely to work in businesses achieving exits in the upper quartile.

drxDATA found that 40% of businesses achieving an exit had an independent Chair, while 22% had a Chair provided by the PE fund or the business.

Despite the clearly beneficial role that Chairs play in driving value creation, however, the survey found that 60% of private equity backed businesses do not have independent Chairs.

Samuel Robberts, Head of drxDATA said: “Our research indicates that Chairs play an important role in facilitating value creation within private equity backed businesses. This is particularly true if the Chair is independent. Their role as an independent third party to CEO and investor appears to be fundamental their ability to drive more successful returns and this research indicates that investors should closely consider the role that they wish for a Chair to play on their investments.”

drxDATA® is Drax’s proprietary data analytics platform which is used to develop unique data sets providing insights and analysis for our clients.

Drax contact: Samuel Robberts
Head of drxDATA
Tel: 0203 949 9565

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