Private equity investment and the social returns of private companies: a case study analysis of the Banc of America capital access funds
Creators: name: Gregory, Thomas Roy, III
Publisher: name: The University of North Carolina at Chapel Hill University Libraries
Year: 2009

description: This report seeks to discover the types of companies that use private equity investment as a tool for economic development, providing benefits to society, both on the macro and micro level. These social implications are especially relevant today, when private companies and equity investors are increasing the importance they place on being good stewards in the world. With an increase in focus on issues of equity and inequality with regard to people and the environment, the notion of double and triple bottom line investing has become a hot topic in today's business world. Increasingly, the nation's leading investors and largest companies are seeking the positive impacts these investments bring to both the investor and society. Although the goal of this report is to fill a void in research regarding companies that provide double bottom line returns, the results of this report are far from what would be expected. The very image of an underserved company or a company located in a low- and moderate-income area is not necessarily one of hope of prosperity. Nevertheless, this report offers just that - hope and prosperity for underserved markets by analyzing private companies that provide social returns to these underserved areas. What makes these companies unique, however, is that they provide social returns without making the provision of such a part of their mission. In fact, each of these companies operates as a profit-motivated company, and because they meet certain underserved criteria, the results of their financial success are societal benefits. As a demonstration of this commitment, the following analysis of sixty companies in the Banc of America Capital Access Funds (BACAF) portfolio and an in-depth look at two successful BACAF portfolio companies, showed that: Underserved companies have the capability and the means to produce financial results in excess of their not underserved counterparts. During the time period studied in this research, "underserved" and "LMI" companies exceeded "not underserved" and "non LMI" companies in year-on-year revenue growth. On average, underserved companies create higher levels of certain social benefits than not underserved companies. These benefits include management opportunities for females, ownership and employment opportunities for minorities and females, and certain employee benefits, like health insurance and retirement plans. Early indications suggest that companies using private equity as a source of capital are producing positive financial returns to their investors while generating positive social returns for their communities. These companies are using private equity to grow their businesses and increase their impact on the local economies and the neighboring communities. Although the results of this report are at times significant, they come with limitations. First, the companies studied represent a very small percentage of companies that receive private equity as a source of capital. Second, the time period studied was only a snapshot in time - in some cases only a year - which limits accurate trends in the marketplace. Finally, the companies are part of a heterogeneous mix of companies that differ on many levels, including industry sector, geographic location, company size, and stage of growth, among others. These limitations present opportunities for future studies and analyses on the social implications of private equity.