Private Equity Firms’ Exit Decision in the Nordic Market: An Empirical Study on Factors that Influence Private Equity Firms’ Divestment Strategy

Sammanfattning: This paper investigates which factors determine how a private equity-backed fund exits their investment in a portfolio company located in the Nordic markets. A total of 397 Nordic portfolio company private equity exits occurring between January 2005 and December 2017 have been analyzed in this paper. The three main exit strategies in this study are Secondary Buyouts, Trade Sales, and IPOs. The majority of research conducted on private equity firms’ divestment strategy focuses on American and European Union portfolio company investments. The aim of this paper is to fulfill the gap within academia by focusing on the Nordic region and specific factors influencing divestment routes unique to this PE environment. Our findings support the idea that specific PE firm and fund characteristics, portfolio company characteristics, and macroeconomic factors all play a role in determining if a PE firm exits a Nordic investment via SBO, trade sale, or IPO. The most significant factors influencing the decision are the size of the PE fund, the age, total sales, and profitability of the portfolio company (measured as EBIT margin), and the current state of the local stock market and credit market.