Nordic reduces fundraising target

As the firm nears a €1.5bn first close, it has decided to reduce the resources it has devoted to fundraising in order to focus on investments.

Nordic Capital has lowered the fundraising target of its eighth fund from to between €3 billion and €3.5 billion. Having originally targeted €4 billion when it began marketing in April, Nordic does not wish to engage in a protracted fundraising process, according to sources familiar with the matter.

“The fundraising is putting a major strain on their resources,” according to one source close to the firm.  While the firm uses placement agent MVision, it is understood that it has a small in-house investor relations team and no longer wants to have various senior people tied up with the fundraising process, but rather focused on investments.

The firm is planning a first close on €1.5 billion by the end of the year, and aims to finish the fundraising by the end of the first quarter next year. Investors include the Virginia Retirement System, the Massachusetts Pension Reserves Investment Management Board and the Washington State Investment Board, according to Private Equity International data. A source noted returning LPs like these were expected to increase commitment levels by between 8 percent and 45 percent.

Nordic declined to comment. MVision could not immediately be reached for comment.

Many LPs are wondering, how much can they deploy currently?

A Nordic  LP

The firm discussed the matter with LPs, who were – according to one source, “quite positive” about the decision to reduce the target and fundraising time. One long-time Nordic LP contacted by Private Equity International, who was currently considering a re-up, called the move “sensible”, given current market conditions. “The fundraising climate is not as positive as it was last year when [fellow Nordic firm] EQT raised a fund of a similar size,” the investor said. “The macro-economic uncertainties are higher.”

Deal flow in the Nordic region has also been down, the source noted. Mergermarket data shows that’s especially true in the second half of 2012, when 147 deals with a total value of €4.5 billion were done, down significantly from the same period last year when 351 deals worth €22.2 billion were closed.

“Many LPs are wondering, how much can they deploy currently?” the LP said, adding however that Nordic has delivered strong returns. Another source made the same point, noting that Nordic has generated a 3.8x return multiple and a 71 percent IRR on all of their exited investments. The return multiple on the exits in the last 18 months is believed to be 4.8x.

Nordic is currently investing its €4.3 billion Nordic Capital VII, a 2008 vintage that is 78 percent deployed.

An in-depth Nordic roundtable will be featured in the November issue of Private Equity International, with participants including Nordic’s Joakim Karlsson.