Fostering innovation through Private Equity

Published on

12/12/2023

Amended on

14/3/2025

minute(s)

French companies benefiting from Private Equity funds will post remarkable growth in 2021, outstripping national GDP. These investments foster innovation, job creation and company development, strengthening entire sectors. The synergies and expertise of investors contribute to the success of these companies, stimulating economic innovation.

Damien Hélène

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French companies backed by Private Equity funds should see their sales grow by 12.6% in 2021, compared with 8.2% for French GDP. This outperformance is the result of an alignment of interest between investors and innovative companies that are driving growth and job creation.

Private Equity funds support the companies in which they invest at every level, enabling them to advance further in their development phases, and to become or remain market leaders. Private Equity helps consolidate entire industries. To do this, companies need to anticipate or initiate new demands, introducing technical innovations that keep them at the cutting edge of innovation.

The role of Private Equity is not limited to financing, insofar as management companies accompany companies in their growth: they develop genuine value-creation plans. They seek to bring their know-how and networks to companies where they see untapped potential. For example, CEOs can be invited to events that bring together all the companies in which the management company has invested. These opportunities for meetings and discussions create synergies and are real drivers of innovation for companies.

For their part, investee companies choose managers with expertise in their field. For example, a MedTech company will tend to select an investor with a team specializing in new technologies applied to medicine, with employees who have decades of experience and who have internalized key competencies in innovative fields. Backed by this expertise, the management company challenges the company in its development plan, and acts as a partner and teammate throughout the acquisition period.

Innovative SMEs in the digital and technology sectors are the driving force behind innovation and growth in Europe today. Private Equity funds will enable the companies in their portfolios to focus on skills development, training and mentoring to stimulate creativity. Private Equity investments thus contribute directly to our economy's capacity for innovation. Today, according to Invest Europe, 26,000 companies in Europe are backed by Private Equity funds. They employ 10.5 million people, or 4.5% of the European workforce.