Value creation in private equity : have Norwegian private equity companies created value in their portfolio companies?

摘要

This paper investigates value creation in 31 private equity-owned companies in Norwaybetween 1993 and 2007. Its purpose is to find evidence on increased value capturing forthese companies relative to non-private equity-owned companies. We have looked at thedevelopment of companies that have been engaged in a full leveraged buyout process withNorwegian private equity firms from entry to exit.Value creation is made through several different drivers, which are thoroughly presented inthis thesis. The empirical analysis in our thesis has been focusing on value creation throughdirect drivers since these drivers may easily be analyzed using publicly available data. Bydoing statistical tests on ratios that help explaining these drivers, we were able to presentevidence on whether private equity-owned companies have been able to outperform theircomparables during the private equity firms’ holding period.Our results suggest that private equity firms have been successful in obtaining significantrevenue expansion and cost reductions/margin improvements for their portfolio companieson an isolated basis. In terms of improved asset utilization and financial engineering we areunable to provide any adequate significant results. In addition, it seems like buyoutcompanies do not experience any significant changes in employment or changes in levels ofwage expenditures.The industry-adjusted results suggest that buyout companies do not significantly outperformtheir corresponding peers in regard to revenue expansion and cost reductions/marginimprovements. Buyout companies seem to have a somewhat stronger improvement in capitalproductivity than their peers, implying an outperformance from the buyout companies.Moreover, our results do not support any significant changes in long-term debt share duringthe holding period of private equity firms or large differences in long-term debt levelsrelative to their peers at entry, exit and exit +1. Finally, industry-adjusted employmentgrowth and changes in levels of wage expenditures do not support any categorical beliefsabout massive lay-offs or drastically reduced wage expenditures during the holding period ofa private equity firm.