The Operating Impact of Private Equity Investments: A Quantitative Study of Swedish Portfolio Firms

Abstract

Building upon previous work (Bergström, Grubb & Jonsson, 2009; Nordström, 2015) about the operating impact of buyouts in Sweden, this thesis evaluates the long-run abnormal performance of private equity targets. The event window is set between 2012 and 2019, and the private equity targets are picked in 2013. I extend previous research by taking on a longterm perspective using quantitative data on the Swedish market. The research question is posed as “How do Swedish firms receiving private equity investments in 2013 perform relative to a control group of non-private equity backed firms in the years between 2012 and 2019?” and is followed by a sub-question “How do the two groups' performance differ based on the financial accounting-based measures: financial leverage, working capital ratio, EBITDA-margin and revenue per employee?”. These questions allow me to study abnormal performance in four different aspects; leverage, liquidity, profitability, and efficiency, all of which are frequently cited in previous literature, however, not during this specific timeframe and geographic area. Previous empirical studies have been used as a reference point, including articles that span from the 1980s to 2010, and beyond. The theories included primarily cover three distinct perspectives often cited within private equity literature: financial engineering, operational engineering, and governance engineering. Financial accounting-data is sampled from the Orbis database, and coarsened exact matching methodology is adapted to construct a peer group of non-private equity backed companies. By comparing the two groups, I will illustrate the effects of receiving private equity investments. In this study, revenue per employee is the only metric that positively and significantly differs from the peer group of non-private equity backed companies. In conclusion, receiving private equity investment in 2013 has no significant effect besides an increase in revenue per employee.