Exploring a new phase in private equity - A multiple-case study on the use of active ownership practices in Swedish private equity

Abstract: The private equity (buyout) industry is a resilient industry that keeps growing through recessions and crisis. As a result, private equity firms govern bigger companies and become increasingly more important actors in our economy. At the same time, private equity firms become more and more controversial, especially as they expand their operations in Europe. Existing research on private equity has mostly focused on studying the effects of private equity. However, lately researchers have found that PE firms make increasingly more use of their operating knowledge to make changes in organizations - something called active ownership practices. This paper conducts a qualitative multiple-case study of eight Swedish private equity firms to investigate how PE firms work with active ownership practices, but also to create further knowledge on how the characteristics of PE firms affects their ability to be active owners. In addition to providing more empirical evidence that has potential to fill some gaps in previous research, the results show that smaller and larger PE firms approach active ownership quite differently. The most credible explanation found is that the previous form of ownership in portfolio companies, such as founder-ownership or institutional-ownership, affects decision-making processes of PE fund managers significantly.