Nordic books 4x return on IT provider

The exit comes as the Scandinavian firm is planning to hold a €3bn final close in September for its Nordic Capital VIII, having held a €1.7bn first close in February.

Nordic Capital has agreed to sell EG, an IT software company to fellow private equity firm Axcel. 

The deal value, which was undisclosed, is understood to be between €160 million and €170 million, according to a source close to the matter. 

The sale, which is the first exit of Nordic’s Fund VII, a €4.3 billion 2008 vintage, will generate a 4x return and a 30 percent IRR, the source added. 

The sale “was a rather fast process”, Lars Terney, a partner at Nordic, told Private Equity International. “It was not a broad auction but a focused effort that was deemed attractive due to the price terms and the speed by which the process could be executed,” he said, but declined to comment on whether EG attracted interest from other private equity firms. 

EG is a Scandinavian IT software and services business, which Nordic acquired in 2008. Since then, the company has grown significantly. Since 2009, EG has completed 14 add-on acquisitions in Denmark, Norway and Sweden.

Despite the crisis, EG has grown its revenue by nearly DKK 500 million (€67 million, $88 million) and EBITDA by more than DKK 100 million (€13 million, $17.6 million) under Nordic’s ownership, according to a statement. During Nordic’s ownership approximately 360 additional employees were added, from 900 to 1,260, Terney said. 

EG has very much focused its business proposition on making companies more effective through IT and demonstrate ROI as oppose to just [selling] IT for the sake of IT. This has allowed them to weather the storm and grow organically and in-organically despite the market conditions

Lars Terney

Back in 2008, EG felt the effects of the economic downturn, he admitted. “It’s quite normal that in an economic crisis companies pull back on some of the IT investments. EG has very much focused its business proposition on making companies more effective through IT and demonstrate ROI [return on investment] as oppose to just [selling] IT for the sake of IT. This has allowed them to weather the storm and grow organically and in-organically despite the market conditions,” he said.

The divestment of EG is Nordic’s second exit this year. In April, the firm sold Permobil to Investor for SEK5.5 billion (€661 million, $849 million), netting Nordic a 5x return. The exits come at the right time for Nordic as it is attempting to wrap up fundraising for its Nordic Capital VIII. The firm, which declined to comment on fundraising, held a €1.7 billion first close in January and is expected to close the fund in September on €3 billion, revised down from €4 billion. 

EG is the latest example of a secondary buyout in Scandinavia. Earlier this month, Montagu Private Equity sold Hansen Protection, a provider of specialist survival suits for extreme weather conditions, to IK Investment Partners. In May, Polaris Private Equity, a Scandinavian-focused mid-market firm, acquired HTC Sweden from London-listed 3i Group, while in April, Altor Equity Partners sold Nordic food service business Euro Cater to Intermediate Capital Group. In the same month, Nordic acquired Unifeeder, a Danish logistics company from Montagu. 

There’s “a numbers game” going on when it comes to secondary buyouts in the Nordics, Terney said. “The private equity population has grown exponentially over the last 10 years. A number of private equity firms have emerged and that stimulates secondary buyouts,” he said. “We have seen more of Nordic Capital’s companies divested to industrials and Nordic Capital has a much higher percentage of companies being bought as primaries [than secondaries]. Having said that, recent research shows that there isn’t any evidence that secondary are worse investments than primaries,” he said.