The Impact of Capital Intensity on Private Equity Returns A Multiple Regression Analysis

Abstract

This study examines how capital intensity in acquired companies influences return on investments (ROI) for private equity firms. The analysis is based on a dataset of 171 European private equity transactions completed between 2000 and 2025. The analysis employs an Ordinary Least Squares (OLS) regression model to test whether target firms’ capital intensity levels significantly influence ROI for the private equity firm. Capital intensity is measured as the ratio of net property, plant, and equipment to sales and categorized into low, medium, and high groups. The results demonstrate a statistically significant negative relationship between capital intensity and ROI, with investments in low capital intensity firms yielding higher ROI. Several control variables, including holding period, buy value, and macroeconomic indicators, were included in the model to account for other factors influencing ROI. The findings contribute to the literature by providing quantitative evidence that capital intensity affect investment performance and offer practical insights for in- vestment strategy development.