Club Deals vs. Sole PE Sponsor Deals: A Study of Operating Performance on the Swedish Buyout Market

Abstract: This thesis analyze whether investment consortiums in a buyout context, so called club deals, are better at creating abnormal operating value for its portfolio companies as opposed to sole PE sponsors. This is measured by looking at the Sales CAGR, change in EBITDA margin and change in ROIC. The operating metrics are industry adjusted in order to measure the PE sponsors ability to create abnormal operating performance. The sample consists of 193 buyouts on the Swedish market and is collected between 1998 and H1 2011. We find that club deals involving two PE sponsors or more are better at generating value to its portfolio companies than sole PE sponsors. However, when including all club deals which also include strategic investors and passive investors, club deals perform worse than sole PE sponsors. This effect is mainly due to the bad performance of club deals involving strategic investors. These club deals perform significantly worse than club deals involving two PE sponsors or more. The thesis also takes an interest in whether Swedish club deals are able to outperform International club deals. We find that a local advantage exists when it comes to club deals involving two PE sponsors or more. Finally, we find that club deals perform worse if the entry has occurred during a crisis year.