Finnish private equity house Evolver Investment Group is gearing up to launch its debut fund, Private Equity International has learned.
The vehicle, which will be aiming to hold a first close by the end of the year, will target between €50 million and €60 million and invest in small and medium-sized enterprises primarily in Finland and Sweden, co-founder Lasse Kittelsen told PEI .
Evolver, which was founded in 2009, began investing on a deal-by-deal basis in 2010, and has made 10 platform investments since then. The firm is a generalist investor in the SME space, but has made several investments in the heating, ventilation and air conditioning (HVAC) sector.
“We have been quite heavily invested in the installation HVAC sector,” Kittelsen said. “That's partly because we are geographically close to the Stockholm area, which is a very interesting growth area in our opinion. Construction has been booming for quite some time there, and is still going upwards, as we see it.”
So far Evolver has exited three companies; Ålands Lås & Säkerhet, a business in the locks and security sector, which delivered an internal rate of return of around 27 percent and a money multiple of 2.5x; HVAC installation company Björnbergsgruppen, which was sold to Swedish company Bravida in a deal generating an IRR of 62 percent and a return of 4.4x; and sprinkler systems company Mälar Sprinkler, which a portfolio company belonging to Swedish mid-market private equity house Segulah agreed to acquire and is set to deliver an IRR of 52 percent and a return of 3.7x.
Evolver's current LP base is made up predominantly of family offices that prefer to invest deal-by-deal, together with insurance companies. The decision to raise a fund came at the request of one of those insurance companies.
“[Deal-by-deal investing is] quite a lot of administration…and it's not even suitable for most institutional investors,” Kittelsen said. “We see [a fund] as a better way of working, even though we've been happy with the performance so far in the case-by-case investments.”
Kittelsen said that as some of the firm's current LPs are not set up to invest in funds, it will be looking for new LPs. To do this, Evolver plans to strengthen its existing eight-person team with an investor relations professional. The firm will also look to add at least one investment manager to its team, as the current size of the team means Evolver is “not able to move as fast as we would like”, Kittelsen said.
The fund will look to make at least eight platform investments, writing equity cheques of €4-5 million per transaction for businesses with an enterprise value of between €10 million and €20 million.
Evolver has made two investments this year – in Mässbolaget I Tranås and insulation company Cremabs – which, with the agreement of participating LPs, could be rolled over into the new fund.
Terms for the fund have not yet been set. Evolver is considering whether to domicile the vehicle in Finland or in Sweden.
Last month the Stockholm Court of Appeals ruled that carried interest should be taxed as income, rather than capital gains, and that the new rules should be backdated to 2005.
“We are following the Swedish and Finnish situation,” Kittelsen said. “We will probably choose the country where we believe we can conduct our business in the most appropriate and best way for us and our LPs.”