On Complementary Skills in Secondary Buyouts

Abstract

The increasing number of secondary buyouts has raised concerns about the operational value creation potential in such buyouts. Some argue that so-called complementary skills between the two private equity firms involved in a secondary buyout can lead to greater operational value creation, however if this really is the case has not yet been studied. We study the effect of complementary skills on operational value creation in 78 Swedish companies targeted in secondary buyouts between 2003 and 2023. We focus on two dimensions of complementary skills, geographical reach and fund size, and measure operational value creation by EBITDA CAGR during the secondary buyout holding period. We run two linear multivariate OLS regressions, one for each dimension of complementary skills, and find that EBITDA CAGR is significantly higher for both dimensions of complementary skills. Hence, our regression results support that operational value creation in secondary buyouts is greater in the presence of complementary skills between the buying and the selling PE firm.