The new kings of Nordic private equity

With age comes wisdom, but in private equity it also comes with questions of succession. As some of the largest Nordic private equity houses move closer to three decades of existence, many of their founding partners have passed 60, and edge closer to 70 years of age.

Most of the large Nordic private equity firms, such as EQT, IK Investment Partners, Accent and Polaris, have seen their founder step aside and the new king ascend the throne (skip to the bottom of this article to check which firms have already undergone the succession process). But Axcel's hunt for a managing partner to replace Christian Frigast (pictured, above), led by Jens Howitz from recruitment consultancy Russell Reynolds has so far been fruitless.

Joachim Sperling, head of corporate affairs at the firm, says Axcel cannot comment on the recruitment process. He does confirm, however, that a deal had been in place before Christmas with Steffen Kragh, CEO of Scandinavian media conglomerate Egmont, but that Kragh ultimately backed out of the deal.

Likewise, it has been reported that headhunters have been busy in London, where Cinven's Søren Christensen, CVC's Søren Vestergaard, Henrik Kraft at KKR, and Blackstone's Jan Nielsen were supposedly targets.

The X(ternal) factor
Though Axcel says it is looking both internally and externally, the pursuit of Kragh and other external candidates shows the GP has chosen to forge a very different path from the big Nordic buyout firms that have already been through the process: IK Investment Partners, EQT, Nordic Capital and Accent have all promoted their new managing partners from within.

However, Danish firm Polaris Private Equity also diverged from the Nordic norm when it opted for Jan Johan Kühl as the managing partner to replace founder Viggo Nedergaard Jensen. Kühl came from a position as group director of roofing and waterproofing company Icopal before taking the reins at Polaris.

Another Danish GP, Maj Invest Equity, also opted for an industrialist as a replacement for its managing partner in 2011, though the firm is much younger than its counterparts and also a subsidiary of a larger investment company.

Having built their firms from the bottom and led them to success, founding partners are often seen as talismanic figures – with a network and a reputation - which helps raise capital, source deals and, in some, cases create an aura of respect around the GP.

While Pandora proved one of the most profitable exits in European private equity history, Axcel has also seen a number of its investments turn sour and had to hand them off – presumably at a loss.

According to unquote" data, Axcel raised funds in 1995, 2000, 2005 and 2010. With a new fundraising effort understood to be on the cards, Axcel needs to find an heir to its throne to put investors' minds at ease before fundraising begins. Frigast's replacement must be able to convince LPs that Axcel remains a sound investment and that they are the right person to lead the firm, as well as attract and originate deals.

The outsiders
Private Equity Recruitment managing director Gail McManus says looking outside a firm for a managing partner is rare. "It is unusual to bring somebody in at the managing partner level in that you now have a set of partners who are established in the business, and one would naturally expect the managing partner to come from that group," she says.

McManus says it has to be clear why an external managing partner is a better option than an internal promotion, to assuage the existing partner group because of the effect it has on them

"It has an impact on their carry, it has an impact on their working day and it has an impact on how they are perceived in the wider market," she says.

She notes it is less unusual to bring someone in a few years before the next fundraising cycle, with a view to them eventually becoming managing partner. If Axcel eventually does go down the opposite path, the outcome of its next fundraising campaign should help assess whether or not departing from the norm can pay off.

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