German private equity: A catalyst for job creation and economic growth

| McKinsey Direct

In many economies, private equity investment is an established part of the capital markets tool kit, offering companies an alternative way to raise funding and broaden their business horizons. But in Germany, the door to private equity remains only partially open—the result of factors including business culture, a traditional focus on debt finance, and a deep banking pool to support corporate borrowing needs. Still, in failing to take full advantage of private equity, companies in Germany may be missing an opportunity. Our research shows that businesses owned by private equity firms can both grow faster and add jobs, which would be a significant benefit in the current low-growth environment.

McKinsey analysis of a proprietary database of private equity–owned companies highlights the positive impacts that higher levels of private equity investment can have. By our estimate, if Germany could expand its proportion of private equity ownership to bring it on a par with the Nordics by 2030, it could add nearly €100 billion to the country’s GDP and create as many as 1.4 million new jobs, bringing the total in private equity to 2.9 million. That said, Germany has a way to go if it is to reach this potential.

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