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Private Equity in Sweden

Mattisson, Johan (2017) MIO920
Production Management
Abstract
Private equity is a growing global phenomena and private equity companies have become a major
force in many of Sweden’s industries. These companies own portfolio companies which together
employs around 190 000 people and have an annual revenue of over 318 billion SEK.
The purpose of this thesis was to describe and analyze the Swedish private equity industry and
individual companies’ competitive strategy to increase value of portfolio companies and to attract
capital.
The methodical approach of this thesis was qualitative and abductive. Only public data was used bar
the two interviews that was conducted with the case companies. The theoretical framework for the
industry analysis was Porters five forces. The case companies were... (More)
Private equity is a growing global phenomena and private equity companies have become a major
force in many of Sweden’s industries. These companies own portfolio companies which together
employs around 190 000 people and have an annual revenue of over 318 billion SEK.
The purpose of this thesis was to describe and analyze the Swedish private equity industry and
individual companies’ competitive strategy to increase value of portfolio companies and to attract
capital.
The methodical approach of this thesis was qualitative and abductive. Only public data was used bar
the two interviews that was conducted with the case companies. The theoretical framework for the
industry analysis was Porters five forces. The case companies were analyzed on the corporate,
business and operational levels of strategy. A resource based view was used to further analyze the case
companies’ strategic capabilities.
The main findings from the industry analysis was that the vast majority of investors in Swedish private
equity funds are made by professional institutions and a large amount of the investments were of
international origin. The large pool of investors makes it easier for Swedish private equity companies
to attract capital. The number of new private equity funds have been declining since 2007 but at the
same time the average fund size has grown. There are many differentiating factors between private
equity companies. This differentiation is beneficial for the private equity companies as they become
less commoditized from the viewpoint of an investor. A private equity company’s management team
will impact the performance and it is therefore essential for a private equity company to have a skilled
management team. A good track record was found to be an important indicator for a skilled
management team.
One of the case companies, Volati, is focused on consolidating their portfolio companies in an effort to
create synergies. Volati have a long-term ownership style that can be attractive to certain sellers of
companies which can yield a lower valuation for Volati when purchasing a company.
The other case company, Ratos, is more short-term focused and keeps their portfolio companies
autonomous which limits their opportunities to achieve synergies. Ratos wants to find companies that
are good standalone investments. Volati values strategic fit more than Ratos since they aim to create
synergies and to consolidate their portfolio companies.
Both companies are of the opinion that there are high valuations on the market right now. Despite this
both companies continue to invest. Both companies increase the value of their portfolio by providing
various support functions and to actively manage their portfolio companies at the top management
level. Since both of them only supports their portfolio companies at the top level they don’t need a lot
of manpower to manage their companies. Both companies utilize consultants to increase capacity
when needed and to gain access to outside expertise.
Skilled employees, good structural capital and a good reputation was found to be strategic capabilities
that can make a company more attractive to both investors and to increase the value of their portfolio
companies. (Less)
Please use this url to cite or link to this publication:
author
Mattisson, Johan
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
keywords
Private equity, Sweden, Competitive strategy, Listed private equity, Portfolio management, Investor, Investing
other publication id
17/5580
language
English
id
8919458
date added to LUP
2017-06-28 13:17:09
date last changed
2017-06-28 13:17:09
@misc{8919458,
  abstract     = {Private equity is a growing global phenomena and private equity companies have become a major
force in many of Sweden’s industries. These companies own portfolio companies which together
employs around 190 000 people and have an annual revenue of over 318 billion SEK.
The purpose of this thesis was to describe and analyze the Swedish private equity industry and
individual companies’ competitive strategy to increase value of portfolio companies and to attract
capital.
The methodical approach of this thesis was qualitative and abductive. Only public data was used bar
the two interviews that was conducted with the case companies. The theoretical framework for the
industry analysis was Porters five forces. The case companies were analyzed on the corporate,
business and operational levels of strategy. A resource based view was used to further analyze the case
companies’ strategic capabilities.
The main findings from the industry analysis was that the vast majority of investors in Swedish private
equity funds are made by professional institutions and a large amount of the investments were of
international origin. The large pool of investors makes it easier for Swedish private equity companies
to attract capital. The number of new private equity funds have been declining since 2007 but at the
same time the average fund size has grown. There are many differentiating factors between private
equity companies. This differentiation is beneficial for the private equity companies as they become
less commoditized from the viewpoint of an investor. A private equity company’s management team
will impact the performance and it is therefore essential for a private equity company to have a skilled
management team. A good track record was found to be an important indicator for a skilled
management team.
One of the case companies, Volati, is focused on consolidating their portfolio companies in an effort to
create synergies. Volati have a long-term ownership style that can be attractive to certain sellers of
companies which can yield a lower valuation for Volati when purchasing a company.
The other case company, Ratos, is more short-term focused and keeps their portfolio companies
autonomous which limits their opportunities to achieve synergies. Ratos wants to find companies that
are good standalone investments. Volati values strategic fit more than Ratos since they aim to create
synergies and to consolidate their portfolio companies.
Both companies are of the opinion that there are high valuations on the market right now. Despite this
both companies continue to invest. Both companies increase the value of their portfolio by providing
various support functions and to actively manage their portfolio companies at the top management
level. Since both of them only supports their portfolio companies at the top level they don’t need a lot
of manpower to manage their companies. Both companies utilize consultants to increase capacity
when needed and to gain access to outside expertise.
Skilled employees, good structural capital and a good reputation was found to be strategic capabilities
that can make a company more attractive to both investors and to increase the value of their portfolio
companies.},
  author       = {Mattisson, Johan},
  keyword      = {Private equity,Sweden,Competitive strategy,Listed private equity,Portfolio management,Investor,Investing},
  language     = {eng},
  note         = {Student Paper},
  title        = {Private Equity in Sweden},
  year         = {2017},
}