Value creation analysis for private equity funds in Norway 2022

Today’s portfolio companies of PE funds employ approximately 89,800 persons.⁴ Most of these employees are found in the buyout segment, because this segment consists of large, mature companies. The venture and seed segments comprise early-stage companies that focus on technology development and the first step in the commercialization process, and therefore employment is naturally significantly lower in these segments.

In 2022 the portfolio companies employed 89,800 workers. Among these, nine out of ten are in the buyout segment. Despite being more companies in the seed stage, the venture companies employ 20 percent more people. The figure below shows the distribution between the different phases.

In 2022, the portfolio employed 89,800 individuals. Of these, nine out of ten employees were in mature companies within the buyout segment of the portfolio companies. Despite there being far more companies in the seed phase, venture companies employ around 20 percent more people.

The employees are distributed across a total of 457 companies. There are the most companies in the seed phase, with 189 companies, closely followed by the buyout segment with 178 companies. In the venture segment, there are 90 portfolio companies. Since 2016, there has been a significant growth in the number of seed investments, primarily through publicly managed seed funds. In addition, there has also been a clear growth in the number of portfolio companies within the buyout segment, which now counts far more than within the venture segment.

There has been a steady, solid growth in employment among today's portfolio companies over the last 20 years. At the turn of the millennium, just under 17,000 were employed in the portfolio - which had increased to 89,800 by the end of 2022. Thus, there has been more than a quadrupling of jobs over the last two decades. This corresponds to an employment growth of 9 percent each year throughout the period. Just in the last ten years, nearly 50,000 more jobs have been created in the portfolio companies. This illustrates how successful efforts have been to expand the businesses and create jobs in companies owned by private equity funds.

In 2022, there has also been employment growth in the portfolio companies. However, the growth has been somewhat lower than in previous years. In 2022, the number of employees in the portfolio companies increased by 1,500. By comparison, the average annual employment growth has been close to 5,000 in the period 2011-2021. The employment growth in 2022 was primarily driven by growth within ICT and "other sectors".

The somewhat lower employment growth in 2022 followed particularly strong employment growth during the pandemic years of 2020 and 2021. In 2021, employment grew by six percent, while in 2020 it grew by eight percent. This, combined with very low unemployment and a shortage of labor in 2022, may explain that employment growth slowed somewhat in 2022.

In the employment statistics, ICT and consumer goods dominate. These two industries accounted for approximately 45 percent of the total employment among Norwegian portfolio companies in 2022. This is a somewhat lower share than in 2021. High employment is also found within industrial services and industrial products, and in the petroleum industry. Despite employment within consumer goods being 30 percent higher than in petroleum, the value creation within petroleum is over four times as high. Along with petroleum, it is ICT and financial companies that have the highest value creation per employee. This reflects relatively high value creation in emerging ICT companies.

Over the last ten years, the relative employment growth in portfolio companies within industrial services and consumer goods has been moderate, compared to other sectors. Furthermore, portfolio companies within life sciences employ about 3,800 people, despite a modest contribution to value creation. The low value creation compared to employment within life sciences reflects the large investments, uncertainty, and long development paths associated with pharma, as well as high employment within healthcare services.