Side Letter: Nordic PE’s P2P opportunity; LPs’ priorities in GP-leds; Permira opens in India

Nordic PE dealflow isn't the party it used to be. Plus: Misalignment in continuation fund deals and PE execs see a wealth of opportunities in the UK. Here's today's brief, for our valued subscribers only.

Just happened

On stage: Verdane’s Ellinor Schrewelius (right) with Neuberger’s Cecilia Amyot and IH’s Simon Faure. (Source: Swedish Chamber of Commerce for the UK)

Nordic exposure
Side Letter had the pleasure of attending the Nordic Private Equity Forum in London last week. Here are some takeaways from the evening’s discussions:

  • More proactive buyers. Deal sourcing has shifted in the current environment and “GPs have to look for the auction processes, grab those opportunities and have the conviction to do that deal”, said Jan Olsson, chief executive of the Nordics at Deutsche Bank. “There’s still significant amount of dealflow. However, the party isn’t as good as it used to be,” added Maria Perez Hultström, partner and investment manager at Stockholm-headquartered GP Priveq.
  • P2Ps on the up. While take-privates can be the most complex transactions, GPs expects these deals to increase in the near-term as public markets valuations continue to come down and sellers’ valuation expectations adjust to the new reality. “In a downturn, these high-quality assets tend to be priced as lower quality assets… that is a great opportunity,” said Josefine Karlsson, European private equity team at KKR.
  • Tech and talent. The Nordics continues to stand out for its innovative and international-minded talent, as well as its cultural affinity for sustainability, noted Simon Faure, managing director at IH International Advisors. It’s a central part of investors’ portfolios, with €29 billion of capital raised last year across about 60 funds managed by PE and VC GPs based in the Nordics.

Clear misalignment in GP-leds
There are serious gaps between LPs’ and GPs’ priorities in GP-led transactions, a report from Capstone Partners has found. For GPs, re-investment of carry by the GP was the most important factor in a GP-led process, followed by the quality of asset. For LPs, the two elements they most value are having additional time and capital for portfolio company development, and the desire to hold high-quality assets for longer. Steve Standbridge, managing partner and president of Capstone, told affiliate title Secondaries Investor that LPs get “comfort if they know that the GP is all in, that they’re rolling their carry, that they may be rolling their investment”. LPs that are selling will “put a little bit more scrutiny on it, but if they see GPs participating and rolling carry, their belief is that they’re probably getting a fair valuation”.

The lack of rolled over carry is viewed as the biggest red flag raised by LPs with 37 percent citing this issue. Conversely, it is seen as a significant red flag by only 7 percent of surveyed GPs, with about 28 percent saying they were unwilling to substantially roll over any carry into continuation vehicles. Capstone surveyed 110 GPs and LPs globally.

Alignment is a critical issue for LPs and GPs in such transactions – a topic we explored in depth in our Secondaries Special in September.


PE still ruling in Britannia. One could be forgiven for thinking the UK – a country that’s been grappling with leadership woes, an unpredictable pound and residual supply issues caused by Brexit – is a bit of a mixed bag as an investment destination. Research by international investment bank Numis has found this is hardly the case.

The financial institution surveyed 200 senior private equity professionals focused on the mid-market, and found that the vast majority see greater opportunities in the UK compared with other markets globally. Just over 90 percent of respondents said they believe the UK is more attractive or significantly more attractive than the other markets, while 73 percent said their pipeline is focused on UK-listed companies.

Recent regulatory developments in the UK – such as a crackdown by the Financial Conduct Authority on ESG claims made by PE firms and hedge funds, as our colleagues at Responsible Investor reported on in August (registration required) – have contributed to this growing demand, with 92 percent of respondents saying they have made them feel significantly more positive about UK assets. All respondents said they expect competition for such assets to increase over the next 12 months.

The struggling pound has been another driver of this increased competition. Stuart Ord, head of M&A at Numis, said: “Activity levels remain high from overseas, particularly North American buyers, bidding for quality companies in what is now an even more favourable exchange rate environment. Our observation is that many boards recognise this potential vulnerability and are refreshing valuation analysis and preparing for a bid approach.”

Our report last week on currency devaluations examined this phenomenon, finding that the weaker pound could make it a good time to buy assets in the UK. “When the pound goes back up against the dollar, a lot of these funds could be looking at a significant gain simply from a rebound in sterling and a significant bump in future earnings of the target,” James West, a partner at Mayer Brown, told PEI.

Permira’s Indian expansion
Permira has opened its first on-the-ground presence in India, with the appointment of Siddharth Narayan as the firm’s head of India, based in Mumbai. Narayan, who joins from Warburg Pincus, has specialised in investment opportunities in the Indian consumer internet, software, fintech and services sectors for over 10 years.

The Mumbai office is the sixth Permira has opened in Asia. Side Letter understands the firm will focus on buyout and growth equity in India as it expands its team there. PE activity in India remains robust: the country had 748 deals representing $15.7 billion of equity invested in the first half of this year, up 22 percent and 25 percent respectively from the same period last year, per Refinitiv data.

Today’s letter was prepared by Alex Lynn with Adam LeCarmela MendozaHelen de Beer and Tobias Waters