Kapitalfondsejerskab og performancemæssige konsekvenser

Benedikte Møller Christensen & Rasmus Søndergaard Andersen

Student thesis: Master thesis


The main purpose of this thesis, called Private equity ownership and the performance consequences is to examine how private equity funds operate in Denmark and whether Danish private equity investments outperform benchmark. Private equity funds have in recent years become a significant player in Denmark within acquisitions. The number of funds has risen sharply and the number of acquisitions by private equity funds has grown from 6 in 2003 to 52 in 2007. Furthermore the capital committed to private equity funds by investors is at the highest level ever. To understand the private equity model we have studied the extent of private equity ownership in Denmark and the methods the funds use to attempt to maximise value in their portfolio companies. We find that the main approaches used by private equity funds is to develop a new business strategy, act as active investors and optimise the capital structure by increasing debt. The new strategy can be to explore new markets, focusing on core business or minimising cost in business processes. The active ownership combined with a close collaboration with the management and incentive programs ensure that management act in accordance with their investor s interests. We examine the stakeholders affect on value creation in the portfolio companies and find that the creditors due to the financial situation in Denmark are the most important stakeholder at the moment. The financial situation has put the portfolio companies under pressure and if the private equity funds do not fulfil the covenants as agreed it will lead to higher interest rates or demands of additional equity. Through empirical studies of 95 Danish buyouts bought by private equity funds in period 1993- 2006 we analyse the changes in performance from pre buyout to post buyout. We find no evidence that private equity investments perform significantly better than the peer group. Our analysis shows a significant growth in the liabilities and long term debt in both the unadjusted and the adjusted data. Companies owned by funds show a significant growth in revenue, EBITDA and cash flow, but we are not able to prove significant results when data is adjusted with data from the peer group. Our conclusions may be affected by the fact that other corporations have adapted the funds methods to create value or simply that private equity firms are not able to create the operational improvements. It must be pointed out that our data indicates a large spread why the portfolio companies may perform differently.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2009
Number of pages243