Do Private Equity-Related Operational Improvements Persist After Exit? Evidence from Swedish IPOs

Sammanfattning

Prior evidence on the association between private equity (PE) sponsorship and portfolio company performance has predominantly focused on the holding period of the PE sponsor, and on market-based proxies of performance rather than fundamentals. Using a sample of 43 PE-backed and 105 non-PE-backed Swedish IPOs, we run two multivariate OLS regressions to test whether the operational (fundamental) performance levels of PE-backed firms persist after the sponsor exits via IPO, first relative to non-PE-backed IPO peers, and second relative to PE-backed firms' own holding-period performance levels. We find the clearest evidence of performance persistence in net sales, our proxy for the scale of customer-facing activity. PE-backed firms in our data outperform non-backed peers both before and after IPO, and sales within PE-backed firms are higher after exit (IPO) than during the holding period. Profitability results are more mixed, while efficiency and liquidity provide little support for persistence. Overall, our findings suggest that post-exit performance persistence among PE-backed firms is concentrated primarily in the scale of customer-facing activity rather than broad-based across fundamentals. Our study contributes to the PE literature by adding Swedish evidence on post-exit accounting performance, complementing prior work that has focused mainly on holding-period outcomes and post-exit market returns.