Privatization and leveraged buyouts in the Swedish elderly care sector

Abstract: This thesis investigates the impact of operator type on elderly care in Swedish nursing homes. This is done by analysis of the potential differences in terms of quality of care and financial performance between the four operator types; municipality, private equity, private for-profit and private non-profit. We conduct 11 interviews with a broad selection of representatives with much insight in the elderly care sector. Additionally, we examine four different datasets on quality as well as key performance indicators regarding operational efficiency along with the distribution of profits. We find that private equity investors create operational value in terms of a larger increase in EBIT margin as well as in Revenue per employee post-buyout relative to private for-profit operators. At the same time we find no evidence of large differences in quality of care between the four operator types. Further, we see no indications of private equity owned operators generally paying out profits as dividends or using profits to pay off debt over the investment horizon, actions that otherwise could be seen as signs of short-termism. Based on our overall findings we do not see a trade-off between profits and quality. Thus, seeing that private equity owned operators show higher operating performance compared to private for-profit operators while we find no large differences in delivered quality, private equity investors should be suitable owners in the elderly care sector.