Leverage Buyouts : - A boom or bust in the Nordic Region?

Sammanfattning: The private equity (PE) industry has been growing over the recent years and a large amount of capital is invested in Nordic private equity funds. Buyouts which are focusing on a leverage effect, known as the leverage buyout (LBO), have transformed public companies into private equity owned portfolio companies. The purpose of this report is to describe and analyze the current state of the leverage buyout transaction in the Nordic market, with focus on the factors which are affecting the value creation process. Through an abductive approach, data has been collected from interviews with representatives from PE companies and banks with experience of LBO transactions in both the Eu-ropean and the Nordic market. The objective was to examine the factors which are affect-ing the value creation process and to examine why LBO transactions in the Nordic PE market has generated higher EBITDA multiples than in the European market. The study shows that PE companies operating in the Nordic market tends to appreciate operational and organizational value rather than multiple values. Nordic PE companies have in general exercised longer investments in the portfolio companies compared to European PE companies. The long term investments implementation has enabled the Nordic PE companies to accomplish entrepreneurial actions in a further extent. Nordic PE companies have also been successful in their streamlining process of the organ-ization structure, which partly explains the greater EBITDA multiples generated in the Nordic market. Another significant factor is the favorable tax regulation in Sweden which has been beneficial for the whole Nordic PE market. The current financial condition has affected both the activity and the transaction structure of LBO’s in the Nordic market. The equity proportion has increased, while unsecured loans such as mezzanine loans and second lien loans have decreased. Nordic PE companies have also stopped using syndicated loans, as it has been too risky to renegotiate debt re-payments with several banks. The study concludes that Nordic PE companies will in the nearest future change their geo-graphical focus more too emerging markets, while turn-a-rounds strategies will be used more frequently in the Nordic market.