Long-term impact of private equity funds on target companies performance and innovation

Student thesis: Master's Thesis

Abstract

This study examines the long-term impact of private equity (PE) funds on the performance and innovation of their portfolio companies in Spain and Portugal between 2011 and 2019. Using a quantitative difference-in-differences (DiD) regression analysis, the research evaluates financial data to determine whether PE interventions improve performance and foster innovation of their invested companies post-acquisition compared to a control group of similar companies not supported by these funds. The sample includes 159 Iberian deals (80 from Spain and 79 from Portugal). The findings indicate that, while PE support leads to statistically significant improvements in some operational efficiencies and financial metrics, such as the EBITDA margin, it negatively impacts innovation. This negative impact is evidenced by a progressive reduction in Intangible Assets as a percentage of Total Assets in the target companies. This suggests that private equity funds may prioritize short-term financial returns over long-term innovation in their portfolio companies. The study contributes to the understanding of the dual role of private equity funds in shaping financial performance and innovation in mature markets.
Date of Award17 Oct 2024
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorJean-Louis Paré (Supervisor) & José Faias (Co-Supervisor)

Keywords

  • Private equity
  • Long-term impact
  • Performance
  • Innovation

Designation

  • Mestrado em Gestão e Administração de Empresas (mestrado internacional)

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