During the past 20 years Private Equity has become a significant industry in the Swedish financial market. In recent years the Private Equity players have been achieving stunning rates of returns and the number of deals are constantly increasing. Previous studies declares that firms perform better post a Buyout, both increased return on equity and efficiency is often achieved.
Who is it then that initiates these deals, who creates the capital structure and who realize them? Usually there is an investment corporation (Private Equity firm) who finds potential targets and implements a Buyout. The question is how these firms works with their investment process and how they manage to achieve such high returns.
With this thesis we aim to study the Swedish Buyout market and to closer examine a number of deals seen from the investors perspective. Throughout this thesis there will be three different sections, that is, the work before an investment, the work during the ownership time and finally the exit. The purpose is to answer questions like; how can one characterize a potential target, how does the Private Equity firms create value and what exits is most commonly used today?
Besides answering the previous mentioned questions this thesis also includes a purpose to provide the reader with an overall knowledge regarding the Private Equity industry, due to the fact that it is relatively unknown to many. The prior objective has been to present interesting and up to date information about the Swedish market and its development.
The purpose has been achieved by carrying out a study of two active Buyout participants and interviews with both fims have been made. The accumulated information from this study has been compared with the theoretical and empirical framework. In order to achieve a deeper understanding of the Private Equity industry we have selected to work with a qualitative approach.
In the chapter containing the analysis, important characteristics for a potential target is presented. Moreover, there is an analysis which discuss how a Private Equity firm should work in order to create value in the target. Finally, it discuss the choice of exit and determines which type that is most frequently used.
Our results indicate that the following factors are important to consider when realizing a Buyout investment process.
• The importance of due diligence. There are, however, tendencies to overwork the due diligence process which might imply unnecessary costs and more bureaucracy.
• There is a strong relationship between majority ownership and high rates of return.
• The importan...
