Why Verdane’s buyout fund is an ‘edda-fying’ development

The Nordic firm's Edda fund shows LPs are willing to back new propositions from GPs that can demonstrate an ability to deploy capital in a challenging environment.

Last it emerged that Nordic direct secondaries firm Verdane Capital Partners had raised its first-ever buyout fund, Verdane Edda, collecting SKr 3 billion ($364 million; €294 million) for the strategy and closing on its hard-cap.

If you’re not familiar with Verdane, you should be. The firm, which opened an office in London last year to complement the four in the Nordics, has returned to market on average every two-and-a-half years since 2003 with its flagship direct secondaries vehicles. The latest – Verdane Capital IX – raced to final close in just five months and has deployed around 50 percent of its Skr3 billion in under two years.

It’s clear the firm has little trouble finding attractive deals. How? The Nordic region is “arguably the most digitally savvy” and is over-represented in terms of technology companies, managing partner Bjarne Lie told Private Equity International on Wednesday. While Verdane is not a tech-focused firm, the sector is throwing up plenty of opportunity.

While Verdane has traditionally acquired portfolios of direct stakes, almost half the deals from its latest secondaries fund have so far been single assets and some were majority acquisitions, such as Norwegian software company Lingit.

According to Lie, the firm decided to launch its dedicated buyout fund after realising there was a hole in the market neither its direct secondaries vehicles nor international tech-focused buyout firms could serve. With Edda – named after a piece of Norse literature – the firm can invest up to €50 million per company, more than triple the €15 million limit of its direct secondaries vehicles.

Verdane isn’t the only direct secondaries specialist to have acquired majority stakes in single companies. Hong Kong’s NewQuest Capital Partners acquired 100 percent of back-office outsourcing firm Integreon in 2016 using its third direct secondaries fund and Vision Capital Partners picked up a majority interest in Swedish niche bank Nordax Group in 2010 through its Fund VII. The dividing line between a direct secondaries fund and a regular PE firm that does secondary buyouts has always been unclear.

Verdane’s move is not a sign of waning interest in direct portfolio deals – the Edda fund is in addition to, not instead of, its established direct secondaries line. It is instead an indication that investors are willing to back new propositions from established managers that have demonstrated an ability to deploy capital in a challenging investment environment.

Where do you see the future of the direct secondaries market? Write to us: adam.l@peimedia.com