Where Value Hides: Undervaluation in Nordic Public-to-Private Transactions

Sammanfattning

This thesis examines whether undervaluation is a determinant of Nordic public-to-private transactions from 2005 to 2025 and whether a fundamental valuation approach captures this relationship better than market-based multiples. Using a residual income valuation (RIV) model, the study estimates fundamental values for Nordic public-to-private targets and for a control sample of publicly listed firms that were acquisition targets but remained listed after the transaction. We find that public-to-private targets have a higher mean RIV/MV ratio than control firms, at 1.247 compared with 0.946, indicating that public-to-private targets exhibit higher estimated fundamental values than their observed market values. Logit regressions further show that RIV/MV is positively and significantly associated with the likelihood of a public-to-private transaction. By contrast, the market-based valuation multiples used in this study, Tobin's Q and EV/EBITDA, do not show a robust significant association. These findings suggest that undervaluation is a determinant of Nordic public-to-private transactions, but it depends on how it is measured. In addition, it suggests that fundamental valuation captures undervaluation in Nordic public-to-private transactions better than market-based valuation multiples.