Assessing the Operational Value Creation by the Private Equity Industry in the Nordics

Sammanfattning: More and more capital is being directed towards the private equity industry. As a result, private equity owned firms make up an increasingly large share of the economy. Therefore, it is becoming more important to understand the nature of how the operational performance of firms change under private equity ownership. This study looked at how the operational efficiency in terms of EBIT-margin changed over a three-year period after a private equity acquisition in the Nordic market. The study found that companies which had an initial positive EBIT margin behaved differently from companies with an initial negative EBIT margin and therefore two separate models where created. It was found that in the case where the company had a positive EBIT margin before being bought by a private equity firm saw an average decrease in EBIT margin of 1.14% units. In the case of a firm with initial negative EBIT-margin a private equity acquisition led to an average increase in EBIT margin by 1.99% units compared to the reference data. This study thus shows that private equity ownership affects the operational efficiency of companies. Moreover, it shows that one should make a distinction between PE ownership in profitable growth cases and turn-around cases of inefficient companies and that the impact of PE ownership in terms of effect on operational profitability can be vastly different depending on the nature of the acquisition in this regard.