PE-funds and Portfolio Companies

Simon Frederiksen & Anders Nicolai Beisheim

Student thesis: Master thesis

Abstract

The objective of the thesis is to analyze how PE-funds govern portfolio companies, considering a juridical and economic perspective, to determine the conflicts arising from the aim of value creation in the shortterm ownership. Further, the thesis intends to determine how the governance make PE-funds liable to tort under Danish law, and the assessment under which legal principles the liability is determined. The analysis elaborates on the juridical framework of PE-funds in Denmark, thus the focus is to establish an understanding of the implementation of AIFMD (Alternative Investment Fund Managers Directive) and its scope. Considering the corporate structure of PE-funds, the ownership of portfolio companies is analyzed in the scope of the Danish company Act, to determine the juridical limitations set up for the active ownership. Previous and ongoing Danish case law is used as supplementary means of interpretation on the liability for PE-funds due to their active ownership. It is here found that the active ownership and the involvement by the PE-fund, influence under which assessment of norms the liability is determined. From the active ownership of portfolio companies derives heavy expenses to insure interest alignment of interest between the PE-fund and the portfolio managers – in a theoretical perspective of principle/agenttheory. Therefore, the focus of the economic analysis is on the optimal combination of incentive- and monitoringintensity of the management, to attain the lowest possible cost with the highest revenue outcome for PE-funds. In an interdisciplinary analysis, the thesis examines the actual governance of Danish PE-funds, to find the optimal solution to an economic efficient active ownership, combined with a minimal risk of liability under Danish law. In conclusion, PE-funds are competing the regular stock market for the investment of institutional investors. In the aim of maintaining PE-funds as market leader on dividend, and attaining a minimum of liability under Danish regulations, the PE-funds must find the optimal constellation of their active ownership and a delegation of managerial task to the portfolio management.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2018
Number of pages108
SupervisorsPeer Schaumburg-Müller