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Private equity (PE) has been surrounded by success in the United States for the last 30 years. The 80s were characterized by some of the most profiled leveraged buyout deals ever, but the meltdown of the junk bond market in 1990 put a halt to the activity and ended an era of highly leveraged deals. PE firms were forced to rethink their concept, and in the beginning of the 90s the activity resumed, now less based on leverage and more focused on operational improvements in the target companies. During this period, the first Nordic PE firms emerged.
Since its start in the beginning of the 90s, the Nordic PE industry has grown to be one of the region's most important investor groups. Over the years, Nordic PE firms have been able to raise increasingly larger funds and attract additional international investors. There is, however, almost no literature describing and analyzing PE in the Nordic region. Most PE research is based on American empirical data or theories, developed and tested in the U.S. Of the world's 50 largest PE firms, 34 are American, and the U.S. constitutes by far the most sophisticated PE market. Nevertheless, American-based data and theories are not necessarily transferrable to other countries or regions, especially because of differences in management cultures, in the size of the economies, and in the structure of industries, as well as differences in the way capital and credit markets work.
This article seeks to assess how relevant U. S. -based theory and data are in describing PE in general and to what extent U. S. -based theory and data can be used to analyze and describe PE in the Nordic countries in particular.
To compare the conditions for Nordic PE firms against those of their U.S. peers, historical data and previous analyses are used. The article will show that although PE firms are successful in the Nordic countries as well as in the U.S., they are working in quite different environments.
In the Nordic region, management's motivation factors are different and the investment universe is smaller than in the U.S.; also in relative terms, the Nordic markets are less-developed markets. Fundraising is more complicated, because Nordic PE firms are dependent on international investors from very different...