Sector performance in the private equity industry : an empirical study on private equity in the Nordics between 2004 and 2013

Abstract

This thesis examines performance of PE-backed companies on a sector-by-sector basis in the Nordics. In addition, this thesis provides a holistic overview of the performance of PE-backed companies across three dimensions: Financial and Operational Performance, Insolvency Risk and Employment. The analysis is based on a sample of 248 portfolio companies from Denmark, Finland, Norway and Sweden between 2004 and 2013, measured relative to a control group of non-PE-backed companies identified through propensity score matching. We find that portfolio companies in the industrial sector have higher growth in turnover and significant improvements in operational profitability compared to sector peers. Furthermore, portfolio companies in Cleantech and ICT & Technology exhibit significant higher growth in turnover post-transaction, while no differences in operational profitability are identified. For portfolio companies in the energy-, consumer- and health care & life science sector we find no significant differences in growth or operational profitability. However, our results suggest that portfolio companies in Transportation perform significantly worse in terms of operational profitability. The results from the overall assessment of the Nordic PE industry depicts higher growth for portfolio companies, while the change in insolvency risk is neutral compared to peers. Lastly, PE-backing appears to have a positive effect on job creation, while wage levels are unaffected.