A look at the history of Berkshire Partners.
Of course, past performance is no guarantee of future results.
But since we can’t peek into the future of Accela, which was just acquired by Boston-based private equity firm Berkshire Partners, let’s take a look at the past anyway.
The main strategy of private equity is to acquire a majority stake in a company, increase the company’s value, and then sell it to somebody else — in the form of an initial public offering, or perhaps to another private group. The way a private equity investor like Berkshire increases the value of its portfolio companies, however, is not always obvious. They could acquire other companies and merge them with Accela, or they could expand the business into new markets in order to gain new customers, or they could find ways to cut staff without sacrificing quality, or they could oversee the deployment of new products.
Ed Daihl, Accela’s chief executive officer, has given some clear indicators that his company will do some of those things and not others while under the Berkshire umbrella.
But how long will Accela be under the Berkshire umbrella, anyway?
Absent a crystal ball, all we have is the past. From the Berkshire Partners website, we pulled data on 51 companies* the firm has invested in that are no longer in its portfolio. We measured out the number of years Berkshire maintained its investment in each company and then calculated an overall average.
Berkshire holds onto a company an average of about five years before selling it to somebody else.
We also calculated averages based on how Berkshire described the company: a business service corporation, in which it made a management recapitalization investment. Among business service companies, the average length of investment was four years and 10 months. Among the companies that Berkshire made a management recapitalization investment, the average length of investment was five years and six months.
The data is available in chart form below.