Operationel performanceudvikling i danske porteføljeselskaber: En empirisk analyse af det danske private equity marked

Louise Emilie Rem & Ann Simone Dyrby Köhn

Student thesis: Master thesis


This thesis investigates the development in operating performance of Danish private equity-backed companies following a leveraged buyout. For the most part, previous studies of private equity have found evidence of abnormal post-buyout performance in portfolio companies, leading some academics to proclaim the private equity model as a superior organizational form due to its perceived value creating potential. However, a number of recent studies have come to rather different conclusions regarding the private equity model’s ability to improve operating performance, suggesting the findings from earlier research may no longer be valid. Additionally, very little research has yet been conducted on Danish portfolio companies and given a number of structural differences between the Danish and foreign markets, the conclusions drawn from international studies may not be applicable in a Danish context. Hence, the aim of this thesis is to shed further light on how the performance of Danish companies is affected by a change to private equity ownership.
The analysis is two-fold. First, we research how and why the private equity ownership may lead to improvements in the operating performance of portfolio companies. The analysis is based on existing literature as well as interviews with a number of highly experienced private equity professionals. The aim is to develop a comprehensive overview of the different mechanisms in play with regards to operational value creation in private equity-backed companies. Through the analysis, we have identified five direct drivers of operating performance, describing how operational improvements can be achieved in portfolio companies. Additionally, we identify ten indirect drivers of operating performance, detailing specific organizational traits unique to the private equity model that may indirectly facilitate these improvements in operating performance.
Second, we conduct an empirical analysis of the development in operating performance of 55 Danish portfolio companies acquired between 2004 and 2013. Operating performance is measured in terms of growth, profitability and productivity using audited accounting data. The analysis is conducted as an event study, comparing portfolio company performance before and after the acquisition. To isolate the changes in performance arising from the change in ownership, we control for industry effects using matched industry averages. The analysis yields significant evidence of improvements in growth and productivity following the buyout, but we find no significant changes in profitability. However, after controlling for industry effects, we cannot document any significant changes in performance, indicating that the private equity ownership has not resulted in abnormal operating performance. Finally, the sample is segmented on a number of transaction characteristics to investigate how these may impact the operational value creation. The analysis uncovers substantial heterogeneity in the Danish private equity market, but does not document any clear performance impact from the examined characteristics.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2016
Number of pages144