Does a company’s ownership structure affect its financial performance and value creation over time? That’s the question Nordea’s Thematics team set out to explore in their Nordea On Your Mind report, “The ideal owners.”
In their analysis, authors Johan Trocmé, Viktor Sonebäck and Thea Koren distinguish between companies that have a major owner and those that do not. They divide the owners of listed companies into four categories:
- Institutional investors
- The state
- Private equity
- Strategic entities
The last category includes owners that typically have a long-term strategic agenda, and an involvement or commitment to the businesses that is more than purely financial.
Ownership in Europe: The continental versus the Anglo-Saxon model
The Thematics team reviewed all European listed companies with a market cap above EUR 500m. Private equity ownership is small (1%), and state ownership limited (6%), with the bulk split between financial institutions and strategic entities. Continental European companies often have a major strategic owner, while UK companies are most often widely held by financial owners with a greater influence on management, and Nordic companies fall somewhere in between.
Ownership type plays a role in long-term value creation
The analysis of around 2,200 companies shows that companies with institutional major owners are the norm and do not stand out in any major way. State-owned companies invest for the future but demonstrate less capital discipline and underperform over time. Private equity companies have higher leverage and generate superior returns but tend to under-invest and do not outperform in the long term. Companies with strategic major owners seem to find the best balance between leverage, investment and being lean, and they have by far the strongest long-term performance in the sample.
View from the top
To obtain board and group management perspectives, including experiences and reflections on different types of owners and businesses, the Thematics team interviewed Caroline Berg, a fifth-generation family owner representative and chair of the board of Axel Johnson AB, Antti Mäkinen, CEO of Finnish state-ownership vehicle Solidium, and Gunnar Axheim, board member of Swedish state-owned mining group LKAB.
Nordea On Your Mind
Nordea On Your Mind is the flagship publication of Nordea Investment Banking’s Thematics team which produces research for large corporate and institutional clients. The research does not contain investment advice and typically covers topics of a strategic and long-term nature which can affect corporate financial performance.
Top decision makers among Nordea’s large clients across the Nordics receive Nordea On Your Mind around eight times per year. The publication’s themes vary widely and many are selected from suggestions by clients. Examples of topics are artificial intelligence, wage inflation, M&A, e-commerce, income inequality, ESG, cybersecurity and corporate leverage.Explore more themes