The Impact of Private Equity on Firm Resilience and Performance During Crisis: A Study of Portfolio Companies in Sweden

Sammanfattning: Do PE-backed firms contribute to financial stability, and do PE-backed firms perform superior compared to their non-PE-backed peers during crises? These are the two central questions of this paper when company data from 2004 - 2010 is examined for the Swedish market amid the Great Recession, 2008. A sample of 79 PE-backed and 129 non-PE-backed firms are compared. We find evidence that portfolio companies experience improved access to equity capital amid the recession, a finding that is traced to the PE investor relationship. This appears to have enabled the PE-backed firms to reduce investments less and maintain a higher level of investments post-crisis, suggesting that PE-backed firms contribute to stability and not fragility. Furthermore, PE-backed firms are shown to outperform non-PE-backed firms, measured in ROA and market share growth. To add a dimension to the results and explore complementary explanations, we conducted a survey of PE professionals that indicated that also operational assistance in portfolio companies might be an explanatory factor for their stability and performance.