Denmark suffers from lack of newcomer buyout firms

Only one new traditional buyout firm has emerged in the Danish private equity landscape since 2010, according to unquote" data: small-and-mid-market outfit CataCap, which launched its debut vehicle in 2011.

In comparison, more than five private equity firms have been launched in Sweden, three in Finland and two in Norway. While other funds have been raised in Denmark, they have either been institutional investors' in-house firms or deal-by-deal vehicles.

At the recent Nordic Fundraising Summit in Copenhagen, a GP/LP matchmaking event held by the Danish Private Equity and Venture Capital Association, the participant list was devoid of first-time Danish fundraisers, despite a strong turnout of major Nordic and European LPs.

Several local Nordic LPs suggested that a substantial factor in why more new Danish firms have not seen the light of day in recent years is the performance track record of the country's buyout industry

The lack of new firms is not due to lack of interest in Danish private equity assets. The Danish market has seen a growth in buyout deal volume in the past three years, while Finland and Norway have seen deal numbers decline, according to unquote" data. While the Danish economy is among the smaller in the Nordic region, it has been a consistent performer in the past half-decade.

Buyout and investment banking industry alumni have been the main source of new firms in Sweden, Finland and Norway, but the Danish deal-makers have shied away from striking out on their own with classic buyout-type houses. Examples of this include Nordic Capital veteran Christian Dyvig, who established a boutique investment company funded mainly with his own money; and Altor veteran Denis Viet-Jacobsen, who joined his former Altor colleague Johan Cervin in launching deal-by-deal special situations investor Solix.

Several local Nordic LPs, speaking on the condition of anonymity, suggested to unquote" that a substantial factor in why more new Danish firms have not seen the light of day in recent years is the performance track record of the country's buyout industry. Despite high-profile exits such as Pandora, Chr Hansen and Nets, the impression of local Danish funds' performance overall has been less impressive than that of their Nordic peers, according to local investors.

Few of the younger professionals in the Danish private equity industry were involved with some of the country's bigger investment successes in recent years, and as such, building up a strong enough track record to make LPs comfortable enough to back a break-out fund is a struggle.

Other attractions
For the most ambitious young Danish private equity professionals, seeking out opportunities in Stockholm or London currently appears the more attractive option when considering career progression.

In Denmark, GPs are also lamenting quality candidates being snapped up by startups, high-net-worth individuals' investment companies, family offices and local institutions building out their deal-making capacities.

While the need for new Danish private equity funds can be debated in a Nordic private equity market that is already heavily served by funds, challengers to the old guard of Danish firms are needed if the industry's track record and reputation are to be improved. If the country's private equity industry is to truly flourish in the years ahead and establish itself in as prominent a way as its Swedish counterpart, competition is needed to drive innovation and make the industry a more attractive place for Denmark's young and bright finance professionals.

While the incumbent private equity managers may prefer the current amount of space they enjoy in the Danish market, the long-term consequences of new local houses not appearing are likely to be detrimental to the industry. Few Danish firms have managed to complete their first managing partner succession with in-house talent. Without new fund managers where candidates can develop their skills and market knowledge, Danish GPs will continue to run into problems when it comes to securing orderly succession in the future.

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