Industri Kapital, the Stockholm-based private equity house, is poised to announce a final closing of its IK 2003 fund in October. According to well-placed sources close to the fundraising, the firm expects to close the vehicle significantly below its revised target of €1.6 billion.
People familiar with the firm’s plans say the firm expects to raise between €800 million and €1 billion for the fund. A spokesperson for the firm declined to comment.
The fund, which was launched in 2002 with an initial target of €2.5 billion that was later scaled back to €1.6 billion, posted a first closing on €500 million in October 2003.
At the time of the first close, IK had secured commitments from institutions including HarbourVest Partners, Pantheon Ventures, Swedish insurer Skandia and Scandinavian financial services group Nordea.
One unnamed source close to IK said that in recent months, two additional “blue-chip” investors had come on board, committing €110 million between them. Other potential investors are still in the process of conducting due diligence on the fund, the source added.
Having spent more than two years on the fund, IK’s fundraising experience contrasts with that of other Nordic LBO firms. Last year, Nordic Capital closed a €1.5 billion fund which at the time the firm described as “heavily oversubscribed”. Last month EQT announced the €2.5 billion final closing of its latest fund, beating a €2 billion target in just six months. The two houses are regarded as IK’s closest competitors in the Nordic region.
The unnamed source familiar with IK’s plans said closing short of €1 billion would result in the firm “losing the capability” to do large cap deals, but added that the firm could in fact benefit from this. In the past, some of the firm’s most profitable deals have been mid-market, the source said, while some larger investments were less successful.
A €1 billion fund would indeed take IK closer to its mid-market roots, with the average size of individual equity investments likely to be around €75 million. Previous IK buyout funds were closed in 1988, 1995, 1997 and 2000, providing the firm with €108 million, €250 million, €750 million and €2.1 billion of equity capital, respectively.
With a medium-sized fund, IK would occupy similar mid-market space as its founding partner and former deputy managing director Harald Mix, who quit the firm after 11 years in August 2001 to launch new group Altor Equity Partners. Altor went on to close a €650 million debut fund last year – beating a target of €500 million – in just four months. In September 2003, IK lost a director to Altor when Stefan Linder decided to join Mix's operation.
IK has been working hard in recent months to give its fundraising a boost by demonstrating its ability to realise investments. It has done so with considerable success. The recent sale of kitchen manufacturer Nobia delivered a near-eight times money multiple for example. The March 2004 IPO of cosmetics distributor Oriflame, which reaped six times cash, was also a success. In addition, IK completed several profitable recapitalisations of existing portfolio companies.