Operational Value Creation: An Analysis of Secondary Buyouts in the Nordics

Andreas Hovmøller Lauridsen & Rasmus Sjørup Elle

Student thesis: Master thesis


Purpose The increased frequency of secondary buyout transactions have caught the attention of academic scholars. Yet there is still only a very limited and concentrated number of empirical contributions to the phenomenon in the literature today. With this master thesis, we seek to contribute to the current academic literature on the difference in operational value creation between a primary buyout and a secondary buyout. Method The thesis takes a quantitative approach in determining operational value creation within the target companies, in the LBO- and the SBO holding period. Based on a hand-collected sample of 54 secondary buyout transactions, in the Nordics, we compare the operational performance by breaking down ROIC into its components of turnover rate of invested capital and profit margin, for which we have made four testable hypotheses. Hence, we compare the peer adjusted operational performance for the same target company under two different PE holding periods. Findings In this thesis we find that SBOs offer lower value creation in terms of growth and profitability. In relation to working capital management and fixed asset utilization it cannot be rejected that the two holding periods are similar. Our findings predominantly indicate that secondary buyouts are inferior in terms of value creation. Originality This thesis could be of relevant for professionals related to private equity investment as well as academic scholars, since it contributes to the limited knowledge of operational value creation in secondary buyouts with empirical result and by focusing only on the Nordic secondary buyout market.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final ThesisMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2018
Number of pages98