Built to Exit: An Empirical Study of Operational Value Creation in Scandinavian Buyouts

Abstract

This thesis examines operational value creation in Scandinavian buyouts, focusing on the third wave of private equity, where value is increasingly driven by operational improvements rather than financial engineering. The study investigates whether private equity ownership leads to superior operational performance compared to non-PE-owned peers by analyzing 98 buyouts between 2016 and 2020 alongside 363 matched companies. Operational performance is measured using four financial metrics: revenue growth, EBITDA growth, EBITDA margin, and return on assets, across an event window spanning from one year prior to three years post-acquisition. Applying ordinary least squares regression, the thesis tests eight hypotheses grounded in prior buyout literature. These address differences in performance between PE-backed and non-PE-backed firms, the effects of CEO replacement and board representation, transaction-specific characteristics, and the influence of the Covid-19 pandemic. The findings indicate mixed results regarding private equity ownership’s ability to drive superior operational performance. PE-backed firms significantly outperform peers in revenue growth, supporting the emphasis on top-line expansion during the third private equity wave. However, this growth does not translate into improved profitability or efficiency: both EBITDA growth and return on assets decline significantly under PE ownership. Among the investigated drivers, only deal experience is positively and significantly associated with EBITDA growth. CEO replacement and board representation show limited or inconsistent effects. Similarly other explanatory variables, such as secondary buyouts, cross-border transactions, and industry specialization, exhibited limited or insignificant significance, offering only partial or no support for their hypothesized effects. Buyouts completed during the Covid-19 period exhibit higher revenue growth relative to both Covid-affected peers and pre-Covid buyouts, though this did not extend to profitability or asset efficiency. By focusing on the Scandinavian buyout landscape, which is under-researched yet characterized by maturity and transparency, this thesis contributes additional empirical insights to the private equity literature. The results offer practical implications for private equity practitioners and investors aiming to enhance operational value creation in a changing economic environment.