Long-term performance of private equity backed companies

Abstract

This thesis studies the post-exit long-term operational performance of previously PE-Backed across multiple dimensions using a country-agnostic sample of 133 observations matched against a control group on size, country and industry using a Propensity Score Match. Focusing on a timespan between 2012 and 2020, this project represents an attempt to improve the understanding of the impact of Private Equity funds in the long-term performance of portfolio companies. My main findings show mixed results regarding abnormal post-exit performance depending on the performance measured analyzed. Resorting on a Difference-in-Differences regression and the Wilcoxon Signed-Rank method, I found evidence of superior performance of EBITDA margin before and after exit (up until 3 years), although it steams off after 5 years, and even reverts if we consider EBIT margin. Regarding ROCE, ROA and ROS, PE-Backed firms systematically underperform after exit. On the other hand, against a common public opinion, I found strong evidence that PE-Backed firms grow their employee base faster and with bigger wages than not PE-Backed. Additionally, I found that previously PE-Backed firms: systematically underperform during Covid; perform better if not held for more than 4.6 years by PE funds; and overperform in the long-run if exited via IPO. My findings seem to be consistent with the deterioration of the positive PE mechanisms which might occur after not being held anymore by a Private Equity.

Date of Award	30 Jun 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Pramuan Bunkanwanicha (Supervisor)