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School of Business | Department of Finance | Finance | 2011
Thesis number: 12605
Operational performance of Nordic private equity backed buyouts in the recession of 2007-2009
Author: Jääskeläinen, Joona
Title: Operational performance of Nordic private equity backed buyouts in the recession of 2007-2009
Year: 2011  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; operaatiotutkimus; operational research; ostot; industrial purchasing; osakkeet; shares
Pages: 73
Full text:
» hse_ethesis_12605.pdf pdf  size:1008 KB (1031173)
Key terms: Private equity; leveraged buyouts

While buyouts in the 1980s have been shown to improve operational performance of companies significantly, more recent studies have found little evidence of improved operational performance. However, due to limited scope in previous studies, understanding on how performance varies across transaction types, time periods, and geographies is limited. Moreover, buyout research lacks knowledge on how the companies acquired in the latest buyout boom have weathered the subsequent downturn. This thesis contributes to the existing literature by studying the operational impact of a comprehensive sample of Nordic private equity backed buyouts in the recession of 2007-2009. Unlike previous studies, I provide evidence on both private-to-private and public-to-private transactions.


I study 144 companies domiciled in Sweden, Finland, Norway, and Denmark acquired by a private equity fund within the time period from 1.1.2005 to 30.6.2007. I combine a hand-collected deal characteristics data from M&A databases and news articles to accounting data to create a novel dataset that allows for comparison of various operational measures in 2007-2009 across deal types and geographies. I benchmark the performance measures against an industry- and size-matched peer group.


My findings support the hypothesis on private equity model’s ability to create economic value also in tough economic conditions. Private equity backed companies have outperformed their peers in terms of profitability and working capital efficiency. While employee productivity increases relative to benchmark, I find no significant difference in wage or employment development after the buyout. Decreasing personnel costs in relation to sales and higher leverage are associated with greater abnormal profitability.

Performance varies significantly variation between deal types, suggesting different underlying motivations for alternative types of buyouts. Swedish and Norwegian buyouts have performed clearly better than Finnish and Danish buyouts.
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