Key Takeaways
- • The Roosevelt Institute report argues private equity plays four interconnected roles in the US economy: corporate raider, Main Street invader, monopoly builder, and shadow owner.
- • The authors estimate PE and venture capital portfolio company values (excluding dry powder) comprised between 9 and 15 percent of all US nonfinancial business net worth in 2023.
- • The share of leveraged buyout dollars involving public corporations fell from more than 70 percent in the 1980s to less than 50 percent in almost all years since the early 1990s, according to the report's PitchBook-based data.
- • Add-on buyouts, which fold competitors into portfolio companies, grew to more than 40 percent of buyout dollars in recent years.
- • The report frames the shift toward private ownership as a "dark mode" of shareholder value capitalism that can shield firms from market, consumer, or public interest pressures.
Summary
A new report from the Roosevelt Institute, titled "The New Private Equity: Corporate Raider, Main Street Invader, Monopoly Builder, Shadow Owner," assembles proprietary data to map how private equity's organization, scope and strategies have changed in the US economy since the 1980s. The authors argue that private equity has increased its controlling stakes in nonfinancial firms by combining four roles that are not mutually exclusive: corporate raider, Main Street invader, monopoly builder and shadow owner.
The report's central finding is a shift away from the corporate raiding of public companies that defined the industry's early history. The authors estimate that PE and venture capital portfolio companies accounted for between 9 and 15 percent of all US nonfinancial business net worth in 2023, excluding dry powder. Using author-augmented PitchBook data covering 56,974 buyouts and 21,363 exits from 1985 to 2019, the report finds that the share of LBO deal dollars involving public corporations fell from more than 70 percent in the 1980s to below 50 percent in almost all years since the early 1990s. The authors note that the dollar value of this shift is underreported in deal databases because private buyout values are infrequently disclosed. Imputed estimates in the report put private-to-PE deal volume at a peak of about 70 percent in some periods, falling to around 20 percent for public-to-PE deals in the 2010s.
As public targets dwindled, the report says private equity increasingly acquired already-private firms, often locally owned businesses in sectors with high shares of nonprofit, municipal, partnership and family-owned ownership. The authors describe this as Main Street invasion. They also identify monopoly building, in which add-on acquisitions fold competitors into portfolio companies; add-ons rose from negligible shares to more than 40 percent of buyout dollars in recent years. Shadow ownership is evidenced by longer average holding periods and growing secondary buyouts, which the authors say reflect a long-term trend across business cycles rather than a response to recent exit difficulties. The report argues these patterns depend on regulatory and reporting exemptions for private companies, which it characterizes as a possible new "dark mode" of shareholder value capitalism.
The report's central finding is a shift away from the corporate raiding of public companies that defined the industry's early history. The authors estimate that PE and venture capital portfolio companies accounted for between 9 and 15 percent of all US nonfinancial business net worth in 2023, excluding dry powder. Using author-augmented PitchBook data covering 56,974 buyouts and 21,363 exits from 1985 to 2019, the report finds that the share of LBO deal dollars involving public corporations fell from more than 70 percent in the 1980s to below 50 percent in almost all years since the early 1990s. The authors note that the dollar value of this shift is underreported in deal databases because private buyout values are infrequently disclosed. Imputed estimates in the report put private-to-PE deal volume at a peak of about 70 percent in some periods, falling to around 20 percent for public-to-PE deals in the 2010s.
As public targets dwindled, the report says private equity increasingly acquired already-private firms, often locally owned businesses in sectors with high shares of nonprofit, municipal, partnership and family-owned ownership. The authors describe this as Main Street invasion. They also identify monopoly building, in which add-on acquisitions fold competitors into portfolio companies; add-ons rose from negligible shares to more than 40 percent of buyout dollars in recent years. Shadow ownership is evidenced by longer average holding periods and growing secondary buyouts, which the authors say reflect a long-term trend across business cycles rather than a response to recent exit difficulties. The report argues these patterns depend on regulatory and reporting exemptions for private companies, which it characterizes as a possible new "dark mode" of shareholder value capitalism.
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