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Private Equity Firms’ Exit Decision in the Nordic Market: An Empirical Study on Factors that Influence Private Equity Firms’ Divestment Strategy

Johannesson, Oscar LU and King, Jacob LU (2018) NEKN02 20181
Department of Economics
Abstract
This paper investigates which factors determine how a private equity-backed fund exits their investment in a portfolio company located in the Nordic markets. A total of 397 Nordic portfolio company private equity exits occurring between January 2005 and December 2017 have been analyzed in this paper. The three main exit strategies in this study are Secondary Buyouts, Trade Sales, and IPOs. The majority of research conducted on private equity firms’ divestment strategy focuses on American and European Union portfolio company investments. The aim of this paper is to fulfill the gap within academia by focusing on the Nordic region and specific factors influencing divestment routes unique to this PE environment. Our findings support the idea... (More)
This paper investigates which factors determine how a private equity-backed fund exits their investment in a portfolio company located in the Nordic markets. A total of 397 Nordic portfolio company private equity exits occurring between January 2005 and December 2017 have been analyzed in this paper. The three main exit strategies in this study are Secondary Buyouts, Trade Sales, and IPOs. The majority of research conducted on private equity firms’ divestment strategy focuses on American and European Union portfolio company investments. The aim of this paper is to fulfill the gap within academia by focusing on the Nordic region and specific factors influencing divestment routes unique to this PE environment. Our findings support the idea that specific PE firm and fund characteristics, portfolio company characteristics, and macroeconomic factors all play a role in determining if a PE firm exits a Nordic investment via SBO, trade sale, or IPO. The most significant factors influencing the decision are the size of the PE fund, the age, total sales, and profitability of the portfolio company (measured as EBIT margin), and the current state of the local stock market and credit market. (Less)
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author
Johannesson, Oscar LU and King, Jacob LU
supervisor
organization
course
NEKN02 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
private equity, divestment strategy, secondary buyouts, trade sales, IPOs
language
English
id
8947381
date added to LUP
2018-07-02 15:38:44
date last changed
2018-07-02 15:38:44
@misc{8947381,
  abstract     = {This paper investigates which factors determine how a private equity-backed fund exits their investment in a portfolio company located in the Nordic markets. A total of 397 Nordic portfolio company private equity exits occurring between January 2005 and December 2017 have been analyzed in this paper. The three main exit strategies in this study are Secondary Buyouts, Trade Sales, and IPOs. The majority of research conducted on private equity firms’ divestment strategy focuses on American and European Union portfolio company investments. The aim of this paper is to fulfill the gap within academia by focusing on the Nordic region and specific factors influencing divestment routes unique to this PE environment. Our findings support the idea that specific PE firm and fund characteristics, portfolio company characteristics, and macroeconomic factors all play a role in determining if a PE firm exits a Nordic investment via SBO, trade sale, or IPO. The most significant factors influencing the decision are the size of the PE fund, the age, total sales, and profitability of the portfolio company (measured as EBIT margin), and the current state of the local stock market and credit market.},
  author       = {Johannesson, Oscar and King, Jacob},
  keyword      = {private equity,divestment strategy,secondary buyouts,trade sales,IPOs},
  language     = {eng},
  note         = {Student Paper},
  title        = {Private Equity Firms’ Exit Decision in the Nordic Market: An Empirical Study on Factors that Influence Private Equity Firms’ Divestment Strategy},
  year         = {2018},
}