Nordic extends fundraising for six months

The Swedish firm, which is bound by its limited partnership agreement to wrap up fundraising within a year of an ‘initial close’, needed more time to get to the €3bn target of its latest investment vehicle.

Nordic Capital has extended fundraising for its eighth buyout fund to February, according to a source close to the matter. 

Last month, Nordic sent a letter to LPs, asking for the fundraising to be extended until 8 February 2014, the source said. Bloomberg reported on the extension request earlier.  

Nordic, which began marketing the fund in April 2012, held an “initial close” on 8 August 2012, before holding a €1.7 billion first close in February 2013, the source said. Nordic is bound by its own limited partnership agreement to wrap up fundraising a year after the “initial close”, the source told Private Equity International.  

The difference between an “initial close” and a first close is unclear. Nordic declined to comment. 

A legal source told PEI there could be many reasons why firms would hold an “initial close”, ranging from technical reasons to enabling investors to make an allocation in a certain year to showing investors that the fund is actually being raised. Whether a firm can start investing from the “initial close” depends on how the contract is drawn up, the source said.  

It is understood the firm decided to extend the fundraising for six months as some LPs are still waiting for administrative and legal approval before being able to commit to the vehicle. The source also said Ramadan and the summer holidays were reasons the firm needed more time, as many LPs are away during this period. 

It is expected Nordic will reach its €3 billion final close in September, the source said. It is understood  the fundraising is building momentum. International LPs which were previously fearful about Europe are now less reluctant to invest there, especially in Scandinavia, the source said. 

Nordic hasn’t had a straightforward fundraising. Last October, the firm reduced its original €4 billion target to between €3 billion and €3.5 billion because it did not wish to engage in a protracted fundraising process, according to sources familiar with the matter.

The fundraising was putting “a major strain on their resources”, a source told PEI at the time. Nordic has a small in-house investor relations team and no longer wanted to have various senior people tied up with the fundraising process, but rather focused on investments, the source added. 

Nordic has made a number of successful divestments whilst on the fundraising trail. In June, it sold IT provider EG to fellow private equity firm Axcel for between €160 million and €170 million. The sale, which was the first exit of Nordic’s Fund VII, a €4.3 billion 2008 vintage, generated a 4x return and a 30 percent IRR, a source said at the time.

In April, Nordic netted a 5x return when it sold wheelchair business Permobil to Investor. In October last year, another source said Nordic generated a 3.8x return multiple and a 71 percent IRR on all of its exited investments. At that point, the return multiple on the exits in the last 18 months prior to that was believed to be 4.8x, the source said.

Nordic has been putting some of the capital in its latest fund to work; in April, it bought Unifeeder, a Danish logistics company, from London-headquartered Montagu Private Equity for approximately €400 million.  

Investors in Nordic’s Fund VIII include: Ilmarinen Mutual Pension Insurance Company, Los Angeles County Employees' Retirement Association (LACERA), Lundbeckfonden, Massachusetts Pension Reserves Investment Management Board (MassPRIM), Michigan Department of Treasury, New Mexico State Investment Council, Oregon Investment Council (OIC), Oregon Public Employees' Retirement System, Virginia Retirement System and Washington State Investment Board, according to PEI’s Research and Analytics division.