Management of Private Equity Investments
A Study of Swedish Biotech Investment Managers
The Private Equity industry has over the past years been booming and major external environmental changes have made the industry transform rapidly. Increased competition between Private Equity firms is one of the reasons why the industry has been and is being forced to focus more on addition of value through increased operational management. Consequently, the focus of value addition is by some said to be transferred away from deal making and financial skills, and into active operative management. This case study investigates how the portfolio management, and more specifically the measuring and management of performance, is carried out in a number of leading Swedish Private Equity funds with investments in the biotech sector. The biotech sector is characterized by extensive research and development, and many biotech companies often lack income and other measurable financial parameters in the initial phase. Our findings reveal that Private Equity firms to a large extent try to formalize the measurement of performance in the biotech companies, in order to understand and evaluate the development. Non-financial information is being quantified and the measurement process relies to a large extent on trust and faith in operative management, rather than straight financial figures.