What determines private equity holding periods? : an empirical analysis of Nordic private equity investments

Abstract

This thesis seeks to identify what determines private equity holding periods in the Nordics. We examine whether i) portfolio company characteristics, ii) PE firm and PE fund char acteristics and iii) market level conditions have an impact on the exit timing decision. The analysis is based on a sample of 343 private equity transactions in Finland, Norway and Sweden between 2000 and 2016. We find that market variables play a significant role in driving holding periods. The results suggest that investments are held shorter in times with high activity in the IPO market, which indicates that PE firms take advantage of ”open windows” in the IPO market by taking their companies public in times with opti mistic investors and higher valuations. Furthermore, evidence is found that an abundant amount of dry powder in the market accelerates the pace of exit. In line with what we expected, the analysis also shows evidence that increased competition among PE firms at the time of entry decreases the chances of a fast exit. Lastly, the findings suggest that portfolio companies with slower revenue growth are held longer.