Identifying Industries for Platform Investments: A case-based model for private equity screening

We analyze the case of a Nordic PE firm seeking to repeat successful “platform” investments whereby initial purchase of a market leader is leveraged through subsequent acquisition of intra-industry competitors, exploiting scale and scope efficiencies. Combining the literature on the contribution of PE ownership with merger and market structure theory, we develop a ten-point template enabling the case firm’s managers to screen for industries suitable for PE ownership and horizontal integration. We apply the model to Swedish industry data, identifying a set of suitable industries along five quantitative parameters and evaluating three of the remaining industries along five qualitative parameters. Current merger activity in the resultant industries indicates the model’s strength in identifying potential for horizontal integration.