Passing the Baton: An Analysis of Operational Value Creation in Secondary Buyouts

Abstract

This thesis examines whether secondary buyouts (SBOs) deliver comparable operational performance improvements to primary buyouts (PBOs), and which sponsor- and fund-level characteristics drive post-buyout value creation in SBOs. Motivated by the rising prevalence of SBOs in private equity (PE) transactions, particularly across the Nordic region, this study addresses concerns that repeat ownership may lead to diminishing returns from operational interventions. Drawing on a sample of 274 Nordic buyouts executed between 2005 and 2021, the analysis employs OLS regressions with heteroscedasticity-consistent standard errors, along with Random Forest models for robustness. Excess Operating Performance (EOP) is measured across ten KPIs spanning growth, profitability, returns, capital efficiency and leverage. The empirical results show no statistically significant performance disadvantage for SBOs compared to PBOs, suggesting that prior operational improvements do not eliminate the opportunity for further value creation under new ownership. Among the qualitative value drivers, CEO replacement shows a statistically significant positive effect on sales growth, though it is not consistently associated with improvements across other metrics. Fund specialisation and geographic match are directionally positive across several KPIs, albeit without strong statistical significance. Fund size, by contrast, is negatively associated with return measures, suggesting that larger funds may face diminishing effectiveness in driving operational performance. By focusing on operational metrics rather than investor returns, this study contributes to a broad understanding of post-buyout value creation. For practitioners, the findings emphasise the relevance of targeted operational levers and informed sponsor intervention in sustaining performance gains even in successive ownership cycles.