Insight 2013: Deal flow up north

There will be very little structured auction activity in 2013 in the Nordic region, in what will be a similar year to 2012, says Nordic Capital’s Joakim Karlsson.

Nordic Capital's
Joakim Karlsson
expects little
structured auction
activity in  the Nordic
region in 2013.

Private equity firms operating in Scandinavia will continue to be able to acquire businesses at reasonable prices in 2013, according to Joakim Karlsson, a partner at Nordic Capital.

“In terms of acquisition multiples we have had the best year in 20 years. You have to go back to our first fund to find entry multiples at the same level,” he said. High prices are not something we have seen during 2012, he said. “I think that is partly because you have different [sale] processes and you have different realism among owners about market value,” he added.

“If I look at the six acquisitions we have done this year all of them have been in proprietary or semi-proprietary format, which is really a dialogue between the potential buyer and the potential seller, where you don’t get carried away by these processes and the expectations about profit development and what not,” he said.

Deal flow, however, has recently slowed in the Nordic region and this is likely to continue for a while, according to Karlsson. “To a large extend we will see continuation of what we have been seeing in 2012. In the Nordic region, the first half of 2012 was very busy and the second half was a bit slower. I think the first half of 2013 will be a bit slower, and things will be picking up towards the end of the year.” 

“If I look at our pipeline, we have a decent deal flow, but there are very few structured auction processes. I don’t think we see a lot of companies being prepared for sale at the moment, but I imagine that will change towards the summer and the second half of 2013”, he said.

It all comes down to macroeconomics, Karlsson said. “We are optimistic on the global development but still have some doubts about how the eurozone will develop. On balance we certainly believe there are reasons to be positive about 2013,” he said.

“When we look at our portfolio company’s budget we are seeing good developments in the Nordic countries. Companies that have exposure to Asia, China and also North America seem to be very optimistic about those markets. But companies exposed to continental and Southern Europe seem to be significantly more sceptical about what will happen in those regions,” he said.

Overall Karlsson said Nordic Capital is “pretty optimistic”, about 2013. “We have a number of opportunities in our pipeline that are very similar to what we have done in the first half of 2012.”