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Value Creation in Growth Capital and Buyout Transactions - A comparative analysis between different private equity investment types

Jakobsche, Max Alexander LU and Marx, Tjard LU (2025) BUSN79 20251
Department of Business Administration
Abstract
Purpose: To investigate the financial firm characteristics determining investment decisions alongside value creation differences across different investment types and whether private equity investors have a treatment effect on operating firm performance.
Theoretical perspectives: The theoretical perspectives of this paper consist of contracting related theories applicable in the private equity environment (asymmetric information, agency theory and free cashflow hypothesis) which set the framework for the different value creation mechanisms applied by private equity sponsors to overcome previous inefficiencies in firms.
Methodology: This study uses a quasi-experimental setting derived from two different control group matchings (PSM and... (More)
Purpose: To investigate the financial firm characteristics determining investment decisions alongside value creation differences across different investment types and whether private equity investors have a treatment effect on operating firm performance.
Theoretical perspectives: The theoretical perspectives of this paper consist of contracting related theories applicable in the private equity environment (asymmetric information, agency theory and free cashflow hypothesis) which set the framework for the different value creation mechanisms applied by private equity sponsors to overcome previous inefficiencies in firms.
Methodology: This study uses a quasi-experimental setting derived from two different control group matchings (PSM and calipermatch), after which a Difference-in-Differences technique is applied to evaluate the causal impact of the private equity sponsor’s investment on operating
firm performance. The regressions use financial statement metrics as main dependent variables, as well as additional pre-investment control variables to control for firm heterogeneity.
Empirical foundation: The empirical foundation consists of a unique dataset of Swedish private firms (Serrano Database), covering more than 600,000 companies between 1998 and 2022. This data is merged with a sample of transactions from S&P Capital IQ Pro containing
growth capital, leveraged buyouts and secondary buyouts, leading us to analyse a total of 516 transactions in our main specification.
Conclusions: The study confirms that value creation across growth capital, leveraged buyouts and secondary buyouts is not uniform, especially based on different operational engineering mechanisms. We find moderate support for financial engineering motives for the two primary
investment types. Additionally, albeit the ongoing academic debate whether secondary buyouts are an exit strategy for “lemons”, our results indicate that private equity investors can create value for target companies, through EBITDA expansion. (Less)
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author
Jakobsche, Max Alexander LU and Marx, Tjard LU
supervisor
organization
course
BUSN79 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
Private Equity, Value Creation, Active Ownership, Investment Determinants
language
English
id
9193509
date added to LUP
2025-06-26 10:49:37
date last changed
2025-06-26 10:49:37
@misc{9193509,
  abstract     = {{Purpose: To investigate the financial firm characteristics determining investment decisions alongside value creation differences across different investment types and whether private equity investors have a treatment effect on operating firm performance.
Theoretical perspectives: The theoretical perspectives of this paper consist of contracting related theories applicable in the private equity environment (asymmetric information, agency theory and free cashflow hypothesis) which set the framework for the different value creation mechanisms applied by private equity sponsors to overcome previous inefficiencies in firms.
Methodology: This study uses a quasi-experimental setting derived from two different control group matchings (PSM and calipermatch), after which a Difference-in-Differences technique is applied to evaluate the causal impact of the private equity sponsor’s investment on operating
firm performance. The regressions use financial statement metrics as main dependent variables, as well as additional pre-investment control variables to control for firm heterogeneity.
Empirical foundation: The empirical foundation consists of a unique dataset of Swedish private firms (Serrano Database), covering more than 600,000 companies between 1998 and 2022. This data is merged with a sample of transactions from S&P Capital IQ Pro containing
growth capital, leveraged buyouts and secondary buyouts, leading us to analyse a total of 516 transactions in our main specification.
Conclusions: The study confirms that value creation across growth capital, leveraged buyouts and secondary buyouts is not uniform, especially based on different operational engineering mechanisms. We find moderate support for financial engineering motives for the two primary
investment types. Additionally, albeit the ongoing academic debate whether secondary buyouts are an exit strategy for “lemons”, our results indicate that private equity investors can create value for target companies, through EBITDA expansion.}},
  author       = {{Jakobsche, Max Alexander and Marx, Tjard}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Value Creation in Growth Capital and Buyout Transactions - A comparative analysis between different private equity investment types}},
  year         = {{2025}},
}