Resilience sustained

Executive summary of US and Europe Private Company Trends report by Nick Brooks, Head of Economic and Investment Research, ICG

Clear information on how private companies are performing can be challenging to find. At ICG Enterprise Trust we have enhanced our disclosure around the performance of our portfolio companies over the last two years. Therefore, we are pleased to be able to provide this executive summary of the 12th bi-annual edition of the ICG Private Company Trends report. Clients of our manager, ICG, receive the full report and can explore its in-depth view of the key fundamental trends that the global alternative asset manager is seeing across this segment of the market and an assessment of the outlook for the remainder of 2024.

Executive summary

Private companies performed well in 2023, and recent data indicates the strong performance has continued into 2024. Despite geopolitical instability and weak headline economic growth in Europe, private company performance in Europe and the US remained resilient as a relatively defensive sector mix and slowing input cost inflation have supported earnings.

Revenue growth across most sectors continued to normalise from the exceptionally high post-Covid lockdown levels of 2021/22. Although revenue growth has slowed, in most key sectors it has remained above or in-line with pre-Covid norms. A positive development has been a moderation of input cost inflation through the second half of 2023 and into 2024 that has ameliorated the margin squeeze that started in 2022. Continued healthy sales growth and stabilising margins led to a pick-up in private company EBITDA growth in both Europe and the US in the third and fourth quarters of 2023, with Europe continuing to outperform the US.

Performance dispersion at a sector and company level is likely to continue to widen in a higher-for-longer interest rate environment, with pricing power, cost control, balance sheet management and access to capital likely to remain key performance differentiators. In our view this should continue to favour capital providers with medium to long-term investment horizons, strong bottom-up analytical capabilities and the ability to provide flexible capital to support portfolio companies through a continued volatile macro and geopolitical environment.

Resilient private company EBITDA growth