A Necessary Evil in Modern Private Equity? Discovering the Potential for Operational Value Creation in Nordic Secondary Buyouts

Frederik Thaarup Mølbak & Andreas Daugaard Foldager

Student thesis: Master thesis

Abstract

This paper explores the nature of operational value creation in Nor-dic secondary buyouts through a two-layered analysis. The study applies a multivariate OLS regression design, employing a time win-dow of one year prior to two years after the buyout. In the first part, the thesis utilises firm-specific data on 235 buyout transactions – primary and secondary – which occurred between 2010 and 2016. The paper finds less ambiguous results than existing literature on the topic, by documenting that Nordic secondary buyouts exhibit in-ferior operational performance relative to primary buyouts, meas-ured through a set of growth-, profitability-, return- and efficiency metrics. For the second part of the analysis, the paper investigates how enabling and specific factors impact operational performance in secondary buyouts. The paper finds a predominantly positive effect on secondary buyouts from CEO replacement, fund specialisation, lead partner experience and geographical proximity whereas private equity firm size and transactions completed under pressure to invest have no significant impact. The findings complement existing liter-ature on the topic, which has been focused primarily on non-Nordic observations. The paper serves as meaningful guidance for practi-tioners and investors, who may reap insights on how to improve the potential for operational value creation in Nordic secondary buyouts and manoeuvre a challenging return environment.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final ThesisMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages139