Valuation of AX V Nissens ApS and Decomposition of Value Creation during Axcel's Ownership

Abstract

The aim of this thesis is to analyze value creation of private equity funds’ ownership of portfolio companies. This is to be done via a case study of the company AX V Nissens ApS (Nissens) owned by private equity fund Axcel V. Nissens provides cooling solution to the automotive aftermarket, renewable energy sector and industrial applications sector. Axcel bought the majority of shares in Nissens (69,4 pct.) on June 30th, 2017. The price of all shares was 2.097.571 thousand DKK. Until the takeover by Axcel V, Nissens was family owned. Nissens was founded in Denmark and operates primarily in Europe. Using the DCF-model, multiples from a peer group of companies comparable to Nissens, and multiples by sectors, it is concluded in the first part of the analysis that Nissens’ estimated market value is 4.100.133 thousand DKK as of April 30th, 2021. This corresponds to an EBITDA multiple of 12,57x. The internal rate of return of Axcel V is estimated to be 26,57 pct. In the second part of the analysis, the value creation is broken down into the following components: leveraging, EBITDA, free cash flow effect/deleveraging, multiple, combination effect. It is concluded that leveraging contributes 32,75 pct. of the total value creation, EBITDA effect contributes 45,22 pct., free cash flow effect contributes -7,32 pct., the multiple effect contributes 18,59 pct. and the combination effect contributes 10,76 pct. A comparison of the value creation to empirical studies (Capital Dynamics 2011 & 2014) shows both similarities and differences between the value creation in Nissens and in Danish and international private equity transactions. The EBITDA effect was the biggest contributor to value creation across both Nissens and the private equity transaction of the empirical studies, while leveraging was the second largest contributor. The negative impact of the free cash flow effect was also reflected in the study of Danish private equity transactions, which underlines that this is to be expected from Danish private equity owned companies. The results of this thesis may be of interest to those with an interest in private equity funds, value creation in private equity owned companies or those with a specific interest in Nissens as a company.