Safe haven

The resilience and maturity of the Nordic private equity market have drawn the attention of international investors.

Scandinavians have “private equity in their blood”. That’s how one European placement agent characterises the the region’s long history in the asset class. The region is home to established groups on both the GP and the LP side of the partnership.

One reason for this is the outward-looking nature of Scandinavian business, muses David Hutchings, head of private equity at advisory business Albourne. “Companies in the region can’t do much more than break even locally, so they are by their nature internationally focused from an early age,” he says. “This is quite unusual and can make for a powerful formula for private equity firms looking to invest and grow businesses internationally.”

To give an idea of the Nordic private equity pedigree, Jeremie le Febvre, managing partner at placement agent Triago, points to a database his firm compiles. Triago collects “wish lists” from LPs showing which managers they would like to get exposure to via the secondary market. Altor, a Nordic mid-market private equity firm with €3.8 billion under management, is in the top three globally out of a universe of 4,700 requests from 300 different LPs. “To have a Nordic GP among the top three says a lot about the quality of the private equity market in the region,” he says.

The quality of the Nordic GP base appears to be reflected in recent fundraising efforts. The most recent of these would be Litorina, a Swedish lower mid-market private equity firm. The firm is, according to market sources, on the verge of closing its fourth fund after a “hot fundraising” lasting just three months. The firm will have managed to hit its hard cap of SEK2.5 billion (€272 million; $367 million), almost doubling the size of its SEK1.4 billion 2007 predecessor. Litorina was unavailable to comment at press time.

The firm was aided in the fundraise by the burgeoning investor appetite for “local beauties”, as one placement agent puts it: the lower mid-market firms which have not grown out of their segments. The fact that Litorina had recorded a 10x return on a SEK400 million exit in 2009, would also have helped.

In June this year Polaris Private Equity, a Denmark-based firm which focuses on investments in Denmark and Sweden beat its €350 million target for Fund III, closing on €365 million target having been in the market since late 2008.

In the same month, oil and gas-focused private equity firm HitecVision took the market by storm with an offering outside its traditional fund platform: its “asset solutions” fund raised $420 million in just three months, surpassing its $325 million target.

In other fundraising news, EQT, which is headquartered in Stockholm but invests on a global basis, is understood to be in premarketing phase for its sixth fund. One more sizeable investment from the €4.25 billion Fund V will likely push it into fundraising mode, says one source with knowledge of the firm. EQT declined to comment on fundraising.


The region’s LPs have remained active throughout the financial crisis. Sonia Trocmé of placement agent Global Private Equity notes an increased demand from Nordic investors for infrastructure funds. “There is a vast knowledge among Nordic LPs of the infrastructure space,” she says. “During 2009 they were more interested in this area than they were in private equity. They liked the lower risk profile and regular dividend payments, which can make up a large proportion of the total return.” That said appetite for traditional private equity has been coming back in 2010, she adds.

le Febvre concurs: “There is definitely a strong appetite for real assets from Nordic LPs. Culturally it is an area they understand very well.”

Continued appetite from the LP community could be put down to the fact that economically the region has proved more robust than elsewhere in Europe. “Lower interest rates, tax cuts and a rapid upturn in exports, combined with the absence of falling home prices, have made possible a strong rebound in both output and employment after the deep recession,” said a recent report from Swedish bank SEB on its home economy.

Relative fundamental strength in the economy has given GPs the confidence to transact. “It is an attractive market,” says Lars Eriksson, The Riverside Company’s regional director for the UK, Nordic and Baltic countries. “The Nordics has been a little bit of a safe haven for international firms.”

London-based Vision Capital is one of the firms to be attracted to assets in the region. In April it acquired Nordax Finans, a Nordic consumer finance firm, from fellow London-based GP Palamon Capital Partners for €105 million.

In February German- and Nordic-focused private equity firm Triton acquired Ambea, a Nordic healthcare business, from 3i Group for €850 million. Triton later invited private equity giant Kohlberg Kravis Roberts to come in on the deal on a 50/50 basis.

The Ambea exit for 3i was originally destined to be an IPO, but the when the Nordic commercial banking market opened up in early 2010, 3i invited a handful of interested buyers to access the IPO data room, says Tomas Ekman, a Stockholm-based managing director with 3i. Once it became clear that the finance would be available, a deal was struck with Triton three days before the IPO was due to be unveiled.

As PEI was going to press, Kohlberg Kravis Roberts unveiled its first deal in the region: the NOK11 billion ($1.9 billion; €1.4 billion) buyout of accounting and business software company Visma. The vendor, HgCapital, described it as “one of the largest and most successful exits” in its history.

As with many other European markets, transactions – certainly at the large end of the spectrum – have been executed at “full valuations”, says Ekman, who notes that this is down to the fact that the assets getting sold are of the best quality. Riverside’s Eriksson says the region’s attractiveness has made competition for deals “even higher”, but notes that it is still possible to scout for “little leaders” among the lower mid-market.

While LPs and GPs globally continue to rate the Nordic private equity market as a safe place for their capital, the market will go from strength to strength.