Private equity and corporate social responsibility: How does PE companies’ business model affect CSR in the portfolio companies?

Cathrine B. Dalen

Student thesis: Master thesis

Abstract

The purpose of this thesis was to investigate the relationship between PE funds` portfolio companies and CSR. The main focus is to see how the ownership of PE funds affects the CSR taken by the portfolio companies. The research question to be examined in this thesis is “How does PE companies’ business model affect CSR in the portfolio companies?” in the light of whether the PE business model is compatible with CSR. The research method used in this thesis is the case study approach, and it is based on a multiple case design consisting of three different case study companies which are three business companies owned by three different PE funds. The main form of data collection was through qualitative interviews with the different case companies and each of their respective PE owners. Other additional data is collected from secondary sources of public information. The results of the study indicate that the PE funds believe that CSR is necessary and important, and that several CSR measures have been undertaken in each of the portfolio companies. The extent of the perceived importance of CSR varies among the different PE owners and their portfolio companies. Some funds believe in additional benefits leading to enhanced company value through strengthened relationships with the most important stakeholders, and some funds only believe that CSR contributes through the ability to exit the company at a profit. Further, the results revealed that the important factors affecting CSR in the portfolio companies are the business model of the PE owners and their ability to create value for their investors and thereby also the ability to exit the portfolio company. The latter is in part reliant on Socially Responsible Investments (SRI). The principle conclusion was that the PE business model affects the CSR in the portfolio companies. Based on the information gathered from the case companies and their respective PE owner, it is concluded that the concern for CSR is purely dependent on their concern to increase the profitability of the company and to ensure the ability to profitably exit the case company, and thereby also to maximize shareholder value; which is to maximize the investors’ return on their made investments.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2011
Number of pages102