Mid-market private equity investments as a tool to enlarge company size in Spain

This paper investigates the impact of private equity (PE) investments on company performance in the Spanish mid-market segment, focusing on the differential effects of buyout versus growth capital transactions. Using a difference-in-differences methodology with propensity score matching, we compare the performance of 155 PE-backed companies with 158 matched non-PE-backed companies from 2013 to 2020. Our results show that PE-backed companies experience significantly greater post-investment performance in terms of growth in employment, sales, and total assets. Importantly, these effects persist even after controlling for the amount of capital injected, underscoring the value of non-financial resources provided by PE investors. Furthermore, we find that only buyout-backed companies maintain significantly superior performance when controlling for the funding received, suggesting that majority ownership and control mechanisms are critical for value creation. Our findings contribute to the literature by highlighting the heterogeneous real effects of PE and the strategic role of investor involvement, especially in bank-based economies with limited access to alternative financing.