Reverse LBO Performance in Sweden: An Empirical Study

Sammanfattning: This focuses on the question of whether or not private equity firms create value in their portfolio firms that remain after the private equity funds exit. In order to do this the study investigates post-IPO performance in terms of stock returns for a set of 176 IPOs between 2005 and 2016, of which 60 were private equity owned prior to the IPO, and 116 were not. The IPO approach is used in order to reduce the heterogeneity between owners after the private equity funds exit, and the studied time period is the first year after the IPOs. The econometric model used is a year fixed effects model with robust standard errors to control for heteroskedasticity within the sample. The results indicate that there is a statistically significant negative relationship between private equity ownership prior to an IPO and first year excess returns. The discussed reasons for this include less operational and structural benefits for private equity-backed firms than others as well as private equity firms being better at getting higher prices for their companies in the IPO.