A study of active ownership through board representation by norwegian private equity actors in the norwegian population of portfolio company investments

Abstract

This thesis focuses on the indirect drivers of value creation in private equity, through a study of corporate governance mechanisms employed by the major Norwegian PE actors in a population of Norwegian portfolio company investments. More specifically, it focuses on board representation by PE actors in the venture capital and buyout portfolio company investments. For this study, data pertaining to debt/equity, return on assets and portfolio company size has been collected for the current active population of portfolio company investments for the period (t-1) (one year before PE investment) as well as for (t+1) (one year after PE investment). The data on changes in debt/equity has shown that PE actors in buyouts generally increase leverage and/or restructure the capital structure of target investments. All PE actors are represented on the boards of their portfolio companies. The degree of board representation of these PE actors in their target company investments doesn’t show a clear trend over time, hence I have undertaken a qualitative analysis of six portfolio company cases to examine deviations in PE board representation from the main population. The results from these case studies indicate that PE actors are involved on a strategic, financial and operational level. The degree of PE board representation largely depends on factors such as the strategic positioning of these portfolio companies and industry conditions. In terms of the Norwegian population of active portfolio company investments, the findings indicate that the major PE actors focus on a range of investment segments, in addition to the oil sector. The investments are however, geographically regionally clustered.