The Private Equity Investment Process : An aggregated view on information asymmetry reduction

Sammanfattning: The market for private equity (PE) firms exists due to information imbalances between the potential investment and the investors. In previous research, studies have investigated the investment process and its influential factors and the results have showed various criteria affecting the process, as well as different structures of the process. However, none have examined the underlying factors. By creating a more comprehensive model of the PE investment process, this study aims to conclude upon what and when criteria are used and why these are more effective in reducing the information asymmetry. The results indicate that the investment process can be divided into two parts, one perception- creating and one confirmatory. The criteria are to some extent congruent to the market, financial, product and entrepreneur criteria suggested in previous research, however, the findings imply another order of occurrence. Some new criteria have also been identified, namely the sustainability and IT infrastructure related criteria. Factors that are essential in reducing information asymmetry are at process level the confirmatory stages, which contributes with most of the reduction. The findings lead to proposal of similar studies conducted on a specific PE firm strategy in order to reach a deeper of understanding of the specific process.