Value Creation: A Study of Value Creation with Focus on NKT

Frederikke Beck

Student thesis: Master thesis


This project examines value creation on the basis of one specific company, NKT. 21st of September 2016 NKT’s management announced an acquisition of ABB HV Cables and a split of the conglomerate. From the time of announcement to 31st of March 2017, the share price rose 37%. The analysis investigates three themes within the field of value creation. Different studies confirm or invalidate the project’s hypotheses in order to explain NKT’s value creation. The first hypothesis examines the split of the holding company to find out, whether NKT historically has traded with a conglomerate discount. The literature points to both pros and cons of the conglomerate as organizational structure. However the empirical study of both the Nordic and the European markets does not find a statistically solid existence of a conglomerate discount. A comparison with NKT's competitors shows that the company for three years before announcement has traded on a significant lower multiple. A subsequent sum of the parts valuation indicates that the company's share price the day before announcement was DKK 50 lower than the theoretical value, but on the day of announcement increases to a fair level. The first hypothesis concludes that part of the value created after announcement is caused by the spilt. However the analysis does not have the ability to quantify how much. The second hypothesis examines NKT's management structures, and analyses how the change of governance model in 2013 has influenced the value created after 21st September 2016. Based on a strategic leadership perspective, it is confirmed that top management has a significant impact on the company's results, and that changes in management thus affect business performance. Jens Due Olsen was introduced in the beginning of 2013 as new chairman of the board, whereby NKT changed strategic discourse. In connection with the introduction of a new management model later that year, the management of the holding company was terminated and Thomas Hofman-Bang as CEO was fired. Several stakeholders interpreted the new governance structure as an indication of a future split, why part of the conglomerate discount potentially was reflected in the share price before the actual announcement. The third hypothesis examines whether the value creation is caused by the acquisition of ABB HV Cables. The newly acquired company has a more project-driven revenue, whereby NKT Cables adds profitability to the business. Based on the acquisition of new core technology, access to the growing interconnector market and estimated performance related synergies of EUR 30m, it is concluded that NKT Cables with the acquisition of ABB HV Cables strengthens the business. Part of the value created after announcedment is therefore caused by the acquisition. Once again the analysis does not have the ability to quantify how much. The project concludes that the value created in NKT after 21st of September 2016 is caused by a combination of the split and the acquisition motivated by new corporate governance structures. The analyses define value creation as a dynamic and individual process, as all NKT's value creating initiatives have been closely linked.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2017
Number of pages92