The PECCS (PrivatE Company Classification Standard) taxonomy distinguishes itself from other private equity taxonomies through its focus on the private company itself, its multi-pillar approach, and its objective, comprehensive classification.

Here’s a detailed breakdown of the key distinctions:

• Focus on the Private Company: PECCS centers on the fundamental unit of value creation: the private company and its cash flows. Most other taxonomies used in private markets focus on the investment vehicle rather than the private company or asset. PECCS groups entities at the company level rather than at the investment vehicle level. This approach avoids misclassifying assets due to strategy changes at the investment vehicle level and prevents assigning different classifications for slices of the same company.
• Multi-Pillar Approach: PECCS employs a multi-dimensional classification system, considering a broad range of risk factors that extend beyond the industrial activity of a company. The five independent pillars of PECCS are:
  • Industrial Activity (12 classes, 67 subclasses).
  • Revenue Model (4 classes, 14 subclasses).
  • Lifecycle Phase (3 classes, 7 subclasses).
  • Customer Model (2 classes, 8 subclasses).
  • Value Chain (3 classes, 6 subclasses). This multi-pillar approach captures several dimensions of risk factors affecting the valuation of private companies. Existing company taxonomies are focused on industrial activity (GICS, SIC, NACE) and do not always match private sector activities like infrastructure. The value of companies is driven by more than industry classes; other dimensions like their business model or the type of customer or market are highly discriminating factors when it comes to asset value.
• Objective and Independent Pillars: The five PECCS pillars are objective and independent, ensuring a systematic and unbiased classification. This objectivity allows for the classification of private companies even with limited information. The classes within each pillar are exhaustive and mutually exclusive, ensuring that each company fits into one, and only one, category within each pillar. The activity pillar is mapped to other schemes (NACE, GICS, TICCS).
• Comprehensive Risk Factor Coverage: PECCS captures a broad range of risk factors that cannot be captured by considering the industrial activity of a company alone. It addresses the key risk characteristics of private companies beyond “Core” or “Core+” to group them systematically. A complete taxonomy of private firms allows the information available to classify companies objectively into different risk peer groups. Taxonomies used for publicly listed companies over-emphasize industrial activity and ignore other potential risk factors important for private companies without valuation histories.
• Focus on Valuation and Risk Assessment: PECCS enables the assessment of how different PECCS classes impact company valuation. Looking at 10k private equity deals over 25 years, the discriminatory power of PECCS classes on company valuation is statistically robust. PECCS® control variables play a key role in valuation predictions. For example, in the case of two typical transactions, computing the shadow prices while ignoring the company’s revenue model class, leads to a large absolute error of circa 30%.
• Transparent Governance: PECCS has a transparent governance structure to ensure market endorsement and adoption. Every two years, a global market consultation collects inputs from infrastructure investors on the evolution of the asset class. Each market consultation is reviewed by an independent committee that includes major investors, asset managers, and standard setters. The PECCS® Executive Committees finalizes the revision of the standard following the advice of the Review Committee, and EDHEC publishes the standard.
• Mapping the Universe: PECCS is applied to map the universe of private companies. In 2023, this included 800k+ companies in 115 countries, with a total revenue of USD40Tr+ and total assets of USD100Tr+. The application of PECCS® allows for the objective classification of companies into different risk peer groups.