Private Equity Leftovers? A Study on the Operational Performance of Nordic Secondary Buyouts

Lasse Bjerre Skibsted & Olle Henrik Olsson Thelin

Student thesis: Master thesis


The phenomenon of a private equity firm acquiring a portfolio company from another private equity firm – known as a secondary buyout – raises questions regarding the value creation in modern private equity. Using a proprietary data set on Nordic secondary buyouts, we analyze and compare the abnormal operating performance of consecutive buyouts. We find that secondary buyouts generate lower abnormal operating profitability measures in both absolute and relative terms compared to primary buyouts in the same company. Furthermore, we find that secondary buyouts, on average, exhibit higher abnormal debt multiple expansions than primary buyouts in the same target company. These findings suggest that that private equity firms engaging in secondary buyouts are, on average, less motivated by operational performance improvements than by opportunities to utilize leverage in the portfolio company. To qualify our analyses on the operating performance of secondary buyouts, we examine drivers of operating performance changes. We find that prebuyout profitability levels significantly explain the profitability increases achieved by the second sponsor

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2018
Number of pages124