Effect of Private Equity Ownership on Operational Performance in Portfolio Companies

Peter Alexander Csösz-Erdei

Student thesis: Master thesis

Abstract

This master’s thesis examines the effects of private equity ownership on operational performance in portfolio companies by analysing a sample of 225 Nordic buyouts from 2011 to 2017. Based on theoretical findings and previous research on this topic, this paper investigates whether private equity portfolio companies outperform non-private equity owned companies. Furthermore, the differences between Nordic and international private equity funds and their relative operational performance in portfolio companies are examined. Finally, this paper analyses whether any relative increases in operational performance in portfolio companies can be yielded, due to the industry or geography difference within the Nordics. The empirical evidence used for measuring the relative financial performance in portfolio companies is examined through a difference-in-differences approach. In order to determine whether private equity backed companies outperform, a carefully selected control group of 470 companies is identified through a pair-matching criteria methodology. In order to examine the timing of the value creation, an event methodology is applied as the thesis focus on the two distinct event windows, which are the first and third year after the buyout. In order to examine the effects of private equity ownership, the value creation is assessed utilising financial measures on operational performance as performance variables throughout the analysis. This master’s thesis provides empirical evidence from the private equity market in the Nordic, showing that private equity funds do not have better operational performance in portfolio companies during the period of investigation. Furthermore, differences between Nordic and international private equity funds did seem to make an impact on the relative operational performance in buyouts. This study also indicate that the popular industries for buyouts provide similar returns and operational performance, while observations for Swedish buyouts in fact show significant superior performance measured on ROIC

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2019
Number of pages73