Deal Mechanic: Nordic Capital / Permobil

In the seven years that Nordic Capital owned Permobil, it supported the company’s expansion into the US and China and streamlined its operations – doubling sales as a result.

When Swedish wheelchair business Permobil was set up in 1967, the founder, a medical doctor, wanted to provide helpful products for disabled people using the latest technology. His vision, as Permobil chief financial officer Carl Bandhold puts it, was to improve the life of “some of the most unlucky people in our society”. As a result, Permobil has always had a culture that is focused on making sure the patient gets what they need.  

So when Nordic Capital acquired a 75 percent stake in 2006 (the founding families retained the remaining 25 percent), it quickly realised it had to be mindful of that. “The users of these wheelchairs are very disabled people, so it’s important that the users are always in the centre,” says Fredrik Näslund, a Nordic partner. “We have been managing the culture very closely – it was very important for Permobil to keep the family spirit and the very user-focused ideas. For example, wherever you go within Permobil [e.g. when travelling to other manufacturing sites], you hug each other – because that was a habit that the founder had.”

However, Nordic felt the addition of some extra financial resources and knowledge would enable the management team to transform Permobil “from a diamond in the rough into a real jewel”. 

By the time Nordic sold Permobil to fellow Swedish firm Investor for SEK5.5 billion (€661 million, $849 million) in April, reportedly making a 5x return, sales had almost doubled to approximately SEK 1.6 billion (€190 million, $250 million). Staff numbers also increased.

1. Improving efficiency

The first thing Nordic did was to refocus the business. “The organisation is extremely entrepreneurial and was trying [to do] many things at the same time with limited resources,” says Bandhold.

The firm also invested heavily in research and development, according to Näslund, so Permobil could get technical innovations into the product in a quicker and smarter way. Permobil, which is a high-end wheelchair provider, doesn’t manufacture its products in their entirety, but assembles them from different components. This means the wheelchairs can be tailored without actually making a product solely for one customer.

The company also went from a station set-up to a paced production assembly. So instead of having staff moving through the factory, the products did instead; this improved quality and productivity, says Näslund.


2. Moving production abroad

One of the key things Nordic did was to open a US factory (in Nashville) and a Chinese factory (in Shanghai), in a bid to further improve efficiency and reduce costs. “Instead of doing everything out of Sweden, Nordic Capital supported Permobil to source in low-cost markets,” says Näslund. The first half of the products are now assembled in China and shipped to the factories closer to the market.

“Once an order comes in, we build it for that person [depending on where they are] in our factories in Sweden and the US,” says Bandhold. This helped to expand profit margins – Permobil’s EBITDA margin grew from approximately 16 percent to approximately 23 percent during Nordic’s ownership – and almost double staff levels, from 400 to 750. Much of this headcount growth was in the US and China, but the company also increased its workforce in Sweden.


3. Accessing international markets

Although Permobil had been expanding into continental Europe and North America in the 1990s, it didn’t have much capital committed to further expansion, says Bandhold. So Nordic invested heavily in developing new sales markets, including the US, Australia, Canada, Argentina and Brazil.

In the US, for example, market share went from below 15 percent to more than 22 percent. “The US historically has very poor technical aids, but in recent years standards have improved,” says Näslund. And he believes there is a potential to grow further. “As healthcare has improved, disabled people are living longer, so therefore they will use Permobil longer.”

Countries like China and Brazil, where there is great unmet demand for products like these, will spend more resources on medical aids and drive growth, he adds. “The communities we interact with in China are very eager to provide better services for their people in these communities,” agrees Bandhold. This year, the company is starting sales operations in Brazil, China and Argentina, as demand starts to pick up. “As the market develops, we want to make sure we are there from the start.”

Partly due to this international expansion, sales almost doubled to approximately SEK 1.6 billion (€190 million, $250 million). The company has had close to 10 percent organic annual growth during Nordic’s ownership, “even during the turbulent financial crisis years of 2009 and 2010”, says Näslund.


4. Sticking to the high-end

Another key decision taken by Nordic was to keep the company focused on growing and improving its existing product – complex wheelchairs for severely disabled people – rather than trying to branch out into additional products.

“Nordic allowed Permobil to continue to focus on this product, rather than trying to be like competitors and provide everything for disabled people,” says Bandhold.

“Permobil provides wheelchairs that enable users to mechanically change them into various positions, to lower the risks of developing pressure ulcers,” Näslund explains. “In many cases [our customers] can only move their head [and they] run the risk of developing pressure ulcers, which could get infected – and they need a technical aid to stop this.”

“We are the only company that is narrowly focused on that segment of the market, and that has been the reason for our success,” adds Bandhold.

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By investing in the company’s R&D, improving the assembly process, building additional factories and expanding into new markets, Nordic is handing on a company that’s well set for future growth and expansion.

As well as developing its presence in emerging markets, the company also plans to expand further in Europe, says Bandhold. “We have a very good market position in Scandinavia. In continental Europe there is a case for us to ensure more people have access to our product.”

“There is still a lot to do, especially in emerging markets,” adds Näslund.

Overall, both organisations agree that the partnership between Nordic and Permobil has been a good one.

“[We teamed up with a family] that needed help and wanted to do a lot of things [and] Nordic Capital had both the financial resources and the knowledge [to improve the business],” says Näslund. “Now the company is set up to grow at a quicker pace. And that is what Investor, the new [private equity] owner, sees in [Permobil] – a Swedish super-success.”