Fundraising record rounds off active year for Nordic region

Nicole Tovstiga
03 January 2018

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Low interest rates, liquid dealflow and strong fundraising contributed to making 2017 a positive year for the Nordic private equity industry. Nicole Tovstiga reports

Dealflow remained high in the first 11 months of 2017 and the Nordic private equity industry's outlook for 2018 is positive with expectations of further high levels of activity. From January to November there were 96 buyouts, compared with 95 in the same period in 2016 and 76 in 2015, according to unquote" data. However, aggregate value rose from €11.2bn in the first 11 months of 2016 to €13.4bn in the first 11 months of 2017, approaching the €15bn aggregate figure seen in the same period in 2015.

"Private equity players are taking advantage of access to financing and capital, which is easily available to them," says EQT partner Per Franzen. In addition to highlighting the ongoing low-interest environment, industry insiders say terms of access to capital were even more attractive than in previous years. Margin levels decreased, enabling GPs to opt for worthwhile financing packages.

For Nordic Capital managing partner Kristoffer Melinder, the strong dealflow in the Nordic countries this year, particularly compared with other parts of Europe, is only partly due to macroeconomic stability in the region, with local players still proving crucial to the industry's health. "The vast majority of primary deals are being completed by local funds even at the large-cap end, as evidenced by our investments in Lindorff and Nordnet," he says.

Melinder also says there are still ample investment opportunities for medium-sized businesses looking for private equity backing to help them to grow domestically and internationally. "We have completed a number of deals in 2017 as a result of relationships that we have been cultivating for many years," he says.

We believe there have been favourable IPO conditions for several years now, but it is difficult to forecast the future" – Kristoffer Melinder, Nordic Capital

Meanwhile, exits saw somewhat of a slump with 95 divestments recorded in the year up to November 2017, compared with 124 in 2016, according to unquote" data. However, Franzen highlights that, while the exit market as a whole slowed down, IPO activity has increased in the region. "Larger buyouts slowed down as more private-equity-backed companies went public."

The IPO window in the Nordic region has been open for quality companies all year round in 2017, agrees Melinder. Nordic Capital itself completed three IPOs, including Munters and Saferoad in the first half of the year, and Handicare in the second semester.

"We believe there have been favourable IPO conditions for several years now, but it is difficult to forecast the future," says Melinder. "We always evaluate the exit routes for our portfolio based on the specific business and the wider market conditions at the point of sale."

Indeed, data from unquote" reveals a year-on-year rise in capital market exits in 2017. From January to November this year, 12 Nordic private-equity-backed IPOs were conducted, compared with eight for the entire year in 2016. Prior to that, there were 12 Nordic IPOs in 2015, with 15 recorded in 2014 and seven in 2013.

Record fundraising
The fundraising market saw a strong year in the Nordic region and a number of funds were raised in 2017.

At the unquote" Nordic Private Equity Forum in Stockholm in November, Erlend Andreas Nordal, investment manager at Argentum Asset Management, and Daniel Winther, investment director for private equity at Skandia Asset Management, agreed that 2017 could well become a record year for fundraising. According to Nordal, a spectacular increase in fundraising means that 2017 could surpass 2016 levels by as much as 70%.

Indeed, while the number of Nordic-based funds to have held final closes in the first 11 months of 2017 was one shy of the 2016 figure, according to unquote" data, the €9.1bn committed to those vehicles is 90% up on last year's €4.8bn.

Nordic Capital expects this trend to continue in 2018. "There continues to be a high level of interest from LPs in Nordic funds given consistent outperformance and strong returns in the region," says Melinder.