The number of LBOs in Sweden has increased during the last years and the current market trend is positive. MostLBOs involves private companies, but a few concerns public corporations on the national share market. In this thesis we will examine the conditions of a LBO of Cloetta Fazer AB. The purpose is to study existing conditions of Cloetta Fazer AB and to examine pros and cons with the deal. Based upon information presented in the frame of reference and in the empirical part, two cash flow valuations have been carried out. The first valuation is a regular discounted cash flow valuation while the other is a specific LBO valuation. In a LBO valuation the debt terms and the changed capital structure is taken into consideration. The valuations are followed by an analysis where LBO conditions as well as pros and cons are examined. Positive conditions for Cloetta Fazer AB are insensitiveness of market fluctuations, a strong market position, stable cash flows, low risk and strong product trademarks. There is also a possibility of increasing the expected rate of return with more leverage since the current financial structure can take on more debt. We argue that a LBO of a public corporation is surrounded by limited information due to legal restrictions such as insider rules. Limited information makes it difficult to motivate value creation. Other factors that obstruct a LBO of Cloetta Fazer AB is increased market competition, indistinct possibility of rationalising the business and a high EV/EBITDA multiple. We have also found that the IRR value is too low. Due to the fact that a LBO requires a premium of at least 20 % over market value, it is difficult to argue for a LBO of Cloetta Fazer AB.

The focus of this empirical paper is to outline and evaluate certain determinants of lever-aged buyouts (LBOs) in Europe. The paper begins by providing a detailed description of LBOs, with particular emphasis on the European markets. This allows for the development of the four determinants that are studied in greater detail, specifically interest rate, out-standing stock, anti-director rights, and creditor rights. The conclusions indicate that coun-tries with more outstanding stock have larger LBO markets since equity is more liquid in these countries. Further, the results suggest that long-run interest rate is negatively related to the size of the LBO market. The paper goes on to test whether anti-director rights and creditor rights, as developed by La Porta et al. (1998) are related to the size of the LBO markets, but no evidence is found to support this notion. It is thus concluded that deter-minants focused on financing the buyouts play the most significant role in European LBO transactions.

Abstract: Swedish private equity firms have demonstrated a historical success in the buyout industry. However, current trends in the industry such as institutional changes, phenomenon of capital overhang and an influx of new entrants have intensified competition among buyout firms. To maintain the expected high gains, private equity firms must actively create values for their portfolio companies. The purpose of this study is to describe and analyze how private equity firms with a hands-on approach add value to the companies under management. A literature review on value-creation by private equity firms was conducted. The valuecreation methods were classified by the authors under the four themes: governance engineering, financial engineering, operational engineering, and strategic redirections. In order to collect the empirical data, the authors chose an inductive approach, used semi-structured interviews with representatives from five private equity firms. The results show that the studied firms undertake to a large extent similar actions when it comes to corporate governance and financial engineering. With governance engineering, the firms attempt to strengthen the portfolio companies’ governance system through proper due diligence, the appointment of a competent and independent board of directors, an appropriate and deep management incentive program, establishment of a close relationship with management, and periodic management reports. The key to efficient governance is to give the portfolio firms 100% focus on operational and strategic issues in the board meetings. All but one firm use significant debt to lever the buyouts as it is evident that the pressure of debt repayment incentivizes management to better handle scarce capital. Operational engineering and strategic redirection are the two themes in which the firms mainly distinguish themselves. Operational engineering largely concerns running operation more efficiently through a combination of cost-cuttings (divestment of non-profitable product and customer, outsourcing, centralizing purchases) and higher revenue growth (finding new markets, providing more after-sale service, extending product range). Strategic redirection incorporates the focus on core competences, making strategic decisions about investments, divestments, and add-on acquisitions. There have been differences in actions taken by the studied firms. Factors that could affect the behavior of private equity firms are the type of companies acquired, the firm size, their perception of risk and reward regarding a particular action, as well as years of experiences in the industry. There is no common timeframe for actions taken by the studied firms. Nevertheless, all firms emphasize the importance of implementing fundamental changes in the early years of the investments.

<p>Abstract:</p><p>Swedish private equity firms have demonstrated a historical success in the buyout industry. However, current trends in the industry such as institutional changes, phenomenon of capital overhang and an influx of new entrants have intensified competition among buyout firms. To maintain the expected high gains, private equity firms must actively create values for their portfolio companies. The purpose of this study is to describe and analyze how private equity firms with a hands-on approach add value to the companies under management.</p><p>A literature review on value-creation by private equity firms was conducted. The valuecreation methods were classified by the authors under the four themes: governance engineering, financial engineering, operational engineering, and strategic redirections. In order to collect the empirical data, the authors chose an inductive approach, used semi-structured interviews with representatives from five private equity firms.</p><p>The results show that the studied firms undertake to a large extent similar actions when it comes to corporate governance and financial engineering. With governance engineering, the firms attempt to strengthen the portfolio companies’ governance system through proper</p><p>due diligence, the appointment of a competent and independent board of directors, an appropriate and deep management incentive program, establishment of a close relationship with management, and periodic management reports. The key to efficient governance is to give the portfolio firms 100% focus on operational and strategic issues in the board meetings. All but one firm use significant debt to lever the buyouts as it is evident that the pressure of debt repayment incentivizes management to better handle scarce capital.</p><p>Operational engineering and strategic redirection are the two themes in which the firms mainly distinguish themselves. Operational engineering largely concerns running operation more efficiently through a combination of cost-cuttings (divestment of non-profitable</p><p>product and customer, outsourcing, centralizing purchases) and higher revenue growth (finding new markets, providing more after-sale service, extending product range). Strategic redirection incorporates the focus on core competences, making strategic decisions about investments, divestments, and add-on acquisitions.</p><p>There have been differences in actions taken by the studied firms. Factors that could affect the behavior of private equity firms are the type of companies acquired, the firm size, their perception of risk and reward regarding a particular action, as well as years of experiences in the industry. There is no common timeframe for actions taken by the studied firms. Nevertheless, all firms emphasize the importance of implementing fundamental changes in the early years of the investments.</p>

<p>The focus of this empirical paper is to outline and evaluate certain determinants of lever-aged buyouts (LBOs) in Europe. The paper begins by providing a detailed description of LBOs, with particular emphasis on the European markets. This allows for the development of the four determinants that are studied in greater detail, specifically interest rate, out-standing stock, anti-director rights, and creditor rights. The conclusions indicate that coun-tries with more outstanding stock have larger LBO markets since equity is more liquid in these countries. Further, the results suggest that long-run interest rate is negatively related to the size of the LBO market. The paper goes on to test whether anti-director rights and creditor rights, as developed by La Porta et al. (1998) are related to the size of the LBO markets, but no evidence is found to support this notion. It is thus concluded that deter-minants focused on financing the buyouts play the most significant role in European LBO transactions.</p>

published_or_final_version / Public Administration / Master / Master of Public Administration

The literature indicates that private equity backed companies generate attractive returns on capital fortheir investors. These insights are intriguing and raise the question of what private equity firms do toachieve such performance as the majority owners of these companies. Through a qualitative multiple casestudy conducted through interviews with significant actors of two Swedish private equity firms, we ask;how can Swedish private equity firms conducting buyouts improve the operating performance for theirportfolio holdings through active ownership? By investigating chosen private equity actors we recognizedifferent value driving functions that align with the theoretical framing of the phenomenon. The findings ofthis paper highlight that the concepts’ structure, networking, and capital management can be used tocaptivate the active ownership role in driving portfolio company performance.

Obey the Law and Do a Little Bit Extra? The paper provides evidence on how firms’ stakeholder orientation is associated with standard measures of corporate governance using a panel of 1778 US companies during the period of 1995-2006. We construct two binary indicators, one measuring stakeholder hostility and the other stakeholder friendliness using data from KLD ratings agency. Based on these indicators, we classify firms into four groups representing stakeholder hostile, neutral, friendly and ”friendly and hostile” firms. Our results show that both stakeholder friendly and hostile firms tend to have significantly lower insider ownership, smaller option grants, lower pay-performance sensitivities, larger boards, older executive officers and directors, lower institutional ownership and larger number of anti-takeover defenses than the firms in the neutral group. We also find that the probability of stakeholder hostile activity is positively related to the strength of corporate governance, but the effect is insignificant except in local and global community areas. A possible explanation is that in these areas stakeholders are protected mainly by ethics and social norms rather than by various regulations that is commonplace in labour, environment and customer related areas. These findings lend support for the idea that stakeholders are best protected by various regulations. Corporate Governance and Workplace Safety. This paper examines how the weakening in corporate governance affects workplace safety. We use anti-takeover laws in the US in the 1980s as a source of variation in corporate governance. Our measures of workplace safety are the number of violations of OSHA workplace safety regulation, penalties paid for these violations, the number of accidents and employees’ complaints about their workplace safety. We find that firms affected by the regulation presented significantly more workplace safety violations and penalties than otherwise similar firms that were not affected by the regulation. Accidents and complaints tend to decrease as a result of the anti-takeover regulation, but the results are not entirely robust. We also document that the increase in workplace safety violations was significantly smaller in unionized firms. This suggests that unions can play an important role in curbing managerial discretion. How Responsible is Private Equity? The financial success of leveraged buyout targets (LBOs) is frequently associated with deteriorating conditions for other stakeholders, such as workers, customers, suppliers, tax-payers and society as a whole. We obtain a comprehensive set of stakeholder ratings for a sample of 373 LBOs and examine the pre-and post-LBO performance of these ratings. LBO targets are characterized by weak stakeholder relations across a number of measures compared to their peers, in terms of corporate governance, transparency, employee relations and community relations. Controlling for this selection, we do not find systematic evidence in favor of the idea that private equity funds gain at the expense of other stakeholders. Private equity ownership alters targets in the direction of higher pay, improved work-life benefits, increased charitable giving, and decreased concerns related to retirement benefits, adverse economic impact, tax disputes, unfair marketing practices and antitrust problems. / Diss. Stockholm : Handelshögskolan, 2010; Sammanfattning jämte 3 uppsatser.

This thesis focuses on specification of key characteristics and principles of private equity and includes specification of both the local market and the international market trends. Furthermore this paper defines institutional framework for support of private equity in the Czech Republic and specifies the history and operations of leveraged buyouts including description of leverage effect and its illustration. The leverage effect arises when combination of debt and equity is used for financing. Private equity transactions are characterized by uniqueness and this paper describes the investment process starting from the identification of investment opportunity through monitoring to exit. Analysis and definition of key characteristics of target companies is also included.

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