Specialization Competitive Advantage or Not? Evidence from the Nordic PE market

Carl Johan Bergkvist & Gustav Thomas Persson

Student thesis: Master thesis

Abstract

In this thesis we examine whether PE-backed buyouts experience greater post-buyout operating performance than comparable private companies and whether relative specialization by either industry or stage compose a competitive advantage or not. Specifically, we study a sample of 110 leveraged buyouts, and a matched control group, on the Nordic PE market during 2008-2015. By applying an index of competitive advantage using portfolio composition, each observed PE firm is classified as either a specialist or a generalist. We measure post-buyout performance as Turnover growth, EBIT/Sales and EBIT/Assets, over a time period of three years following the buyout. We identify differences in performance using bivariate analysis. In addition, we run multiple OLS regressions while controlling for a number of factors that potentially impact post-buyout performance.
Our findings suggest that; (i) PE-backed companies experience greater post-buyout performance measured as Turnover growth and EBIT/Assets, confirming the alleged superiority of the PE organizational form; (ii) relative specialization by either industry or stage does not impact the performance. Lastly, we note that initial turnover and profitability play an important role when assessing future performance. This suggests that skilled target selection might be more important than investment strategy, in terms of specialization.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final ThesisMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages117