Heterogeneity as a Performance Driver: An Empirical Analysis of Syndicated Buyouts in the Nordics

Abstract: This study examines the impact of heterogeneity among private equity syndicate members on the investment performance. It draws on a unique and hand-collected set of data on 125 syndicated buyouts in the Nordics exited between 1998 and 2021. We find that the effect of heterogeneity on deal-level returns is not one-sided. We show that syndicates with a higher share of buyers different from financial sponsors (i.e., more heterogeneous ones) tend to perform worse, while syndicates without any direct prior ties among their members (i.e., more heterogeneous ones) tend to perform better. We conclude that there is no generic effect of heterogeneity among syndicate members on return metrics in buyout deals. Hence, it is crucial to break down heterogeneity into several well-defined dimensions and analyze their effect separately.