Summa holds EUR 2.3bn final close for Fund III

Summa Equity Fund III was raised in a virtual process that took place over four months, according to a statement. The vehicle is domiciled in Sweden.

Mannheimer Swartling provided legal advice on the fundraise, while Ropes & Gray advised on US legal matters. PwC provided tax advice.

The vehicle will invest in line with the UN Sustainable Development Goals (SDG), focusing on the themes of resource efficiency, changing demographics, and technology-enabled transformation. The fund has made 22 investments in line with advancing these goals to date, five of which were completed in 2021, according to a statement.

Summa classifies its approach as "Private Equity 4.0", using ESG criteria to promote value creation but minimise risk and manage impact.

Summa Equity Fund II held a final close in February 2019 on SEK 6.8bn (EUR 680m); its successor vehicle is around three times larger.

Although impact investing and the role of ESG in investments have become key topics over the past few years, Summa's founder and managing partner, Reynir Lindahl, told Unquote that the Swedish GP has been reporting on these factors since its debut fund. "We have been reporting on impact in our portfolio since day one using our existing established frameworks. We are more vocal about our impact focus now – the mainstream is understanding that this is delivering superior returns, rather than compromising on them."

The fund will target returns of 2-3x money and 20-30% IRR, Indahl said.

Fund III has a broadened remit compared with its predecessors, the GP said in a statement. The fund can now invest in primary capital in growth companies and will cover a broader range of geographies than Summa's previous vehicles, including the DACH region, Benelux and the US, where the GP has made recent hires to its investment team.

"We have become more and more specialised in the past few years, building our portfolio around our core sub-themes, and we will look at deals internationally and in Europe, building an organisation outside the Nordic region," Indahl said.

Investors
The fund saw re-ups from almost all of the LPs in its predecessor vehicle, Indahl said, plus the addition of several new LPs. LPs who have publicly disclosed their commitments to Summa Equity Fund III include the Canada Pension Plan Investment Board (CPPIB), pension fund AP1, HarbourVest, and the University of Michigan.

The LP base comprises pension funds, insurance companies, foundations and endowments, financial investors, and family offices. The fund has LPs from Canada and the US, as well as European geographies including the Nordic, DACH and Benelux regions, the UK, and France. It also has LPs from Singapore, Japan and Australia, according to a statement.

LPs in Fund II included Aberdeen Standard Investments (now trading as Abrdn) and HarbourVest, as well as Swedish and North American pension funds, according to Unquote Data.

Investments
Summa Equity Fund III will follow the strategy of its predecessor, focusing on companies driving resource efficiency, changing demographics, and technology-enabled transformation, albeit with an additional growth capital mandate. "The deal sizes and the companies that we will target have stayed the same," Indahl said. "We look at the challenge we want to solve, with a thesis of how the industry and value chain is changing, looking at potential synergies within the portfolio, both in deal sourcing and in opportunities for the companies to work together."

The vehicle can invest up to 30% of its capital outside Europe. It can write equity tickets of EUR 30m-200m per buyout deal, including co-investment capital. The fund can dedicate the same amount for its growth deals, although this can be deployed over several rounds. It is expected to make 10-15 buyout deals and 10-15 growth deals in total, with around five deals expected per year, Indahl said.

The fund has not made any deals to date. Asked about upcoming deals, Indahl told Unquote: "Currently our deal pipeline is pretty balanced between our thematic areas. We are seeing strong Nordic activity, but we are actively looking in the DACH region, as well as in healthcare globally, especially in the omics sector."

The fund has a strong pipeline for both growth capital and buyouts, he added. "We are integrated in how we approach this: we start with how an area will transform in the long term, then we look at the path there, and what kind of companies can lead that change."

Summa is agnostic in terms of whether its deals are primary buyouts, secondary buyouts or acquisitions from family-backed businesses, Indahl said. "We are more looking at what kind of companies we should target in a sector."

Indahl expects that Summa's strategy will see an increasing number of opportunities over the course of 2022 and 2023, in spite of underlying macroeconomic concerns. "We are quite specialised in our areas and I feel the number of opportunities is increasing and not decreasing," he told Unquote. "Valuations are becoming more sober, which is good, but there is still a difference between high-quality companies and those that have more to prove. We will continue at our investment pace and could potentially increase it, not decrease it."

Summa's recent investments include the acquisition of social care software developer Myneva from Bid Equity in May 2021, marking its first investment in Germany.

People
Summa Equity – Reynir Indahl (managing partner, founder); Hannah Jacobsen (investment director, head of investor relations).

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