Nedbrydning af værdiskabelsen under Nordic Capitals ejerskab af Kompan A/S: Estimering af exit pris samt analyse af værdiskabelsen sammenlignet med empiriske undersøgelser

Joachim Latocha

Student thesis: Master thesis


The object of this thesis is to determine the sources of value creation and provide the reader with an in-depth analysis on how a private equity fund can create value during ownership of a portfolio company. The thesis is a case based analysis focusing on the leveraged buyout of the Danish playground manufacturer Kompan. The company had previously been listed on the stock exchange but was taken private in March 2005 by one of the leading Nordic based private equity funds called Nordic Capital. To determine the sources of value creation a research method based on a recently published German study is used. This makes the findings of this thesis comparable with other empirical studies. The thesis is divided into two main sections: The first part of the thesis seeks to estimate the return on Nordic Capitals equity investment in Kompan under the assumption that the investment was exited by December 2011. In order to do this an enterprise value as of this exit date has been estimated and the resulting internal rate of return (IRR) on Nordic Capitals equity investment has been estimated at approx. 25%. This corresponds to a value creation of approx. DKK 1.08bn for Nordic Capital during the nearly 7 year investment period. The second part of the thesis seeks to separate and quantify the value creation both on absolute, relative and IRR basis. The findings of this decomposition shows that value creation was mainly driven by leverage (39%) and by operational improvements in the form of EBITDA growth and the Free Cash Flow effect (56%). A further analysis of the large increase in EBITDA shows, however, that most of the operational effects are a direct result of the 11 add-on acquisitions during the ownership period. Only about 13% of the operational value creation can be attributed to organic initiatives. The analysis shows the relative value contribution of each driver is in line with empirical research. Only the market effect has had less on an effect in this case than what is normally seen in other buyout cases. The thesis proves the fact that high IRRs can be achieved by private equity funds despite only small improvements in profitability and low organic growth. Since IRR has not been “played” by interim cash flows it is possible to conclude that the investment return created from this transaction has been high compared to other private equity transactions, especially given the long holding period.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2012
Number of pages114