Nordic buyout market soars in Q1

With Q1 2018 now behind us, Unquote Data recorded 33 Nordic buyouts worth an impressive combined EV of around €6.6bn, compared with 27 deals worth a total of €1.9bn in Q1 2017.

In terms of volume, the first quarter of 2018 is slightly above the preceding five-year average of 24 Q1 buyouts per year, matching the total number seen in Q1 2014. But in terms of value, the aggregate of €6.6bn is the highest recorded over the same time frame, surpassing the combined EV of €4.2bn recorded in Q1 2014.

From a sector perspective, deal-makers can expect good activity in the Nordic markets with valuations continuing to play a key factor, says Thomas Hofvenstam, a member of Triton's investment advisory committee. "We do not necessarily prioritise one specific sector over another, as we have seen and invested in attractive investment opportunities across the industrial, services and consumer sectors."

That said, Triton has targeted its buy-and-build approach on companies in the Nordic consumer and construction sectors, which it continues to see as interesting markets with strong underlying fundamentals.

Hofvenstam says this approach has presented the GP with several opportunities to improve Nordic businesses and create value through strategic add-on targets. For example, Triton Fund II company OptiGroup completed seven add-ons in 2017; including Stadsing and PacProduction. Flokk, a Triton Fund IV company, made three add-on acquisitions in 2017, and recently signed an agreement to acquire Profim, a manufacturer of office chairs.

Cyclical sectors
GPs are noticeably thinking more carefully about fund composition and exposure at sector level. IK Investment Partners' Thomas Klitbo says more cyclical assets are becoming attractive once more, such as assets related to retail and construction.

However, Accent Equity Partners' Benny Zakrisson says not all fund managers are currently active when it comes to investing in these spaces. "The market is presently not favouring physical retail and construction, but we are not ruling these sectors out," he says.

This appears to be backed up by Unquote Data, which shows that Nordic retail deal volume has decreased from 12 buyouts in 2014 and 10 in 2015, to seven in each of the last two years. Similarly, buyouts of construction companies fell from five in 2016 – the highest dealflow since the global financial crisis – to just two in 2017.

We have seen and invested in attractive investment opportunities across the industrial, services and consumer sectors" – Thomas Hofvenstam, Triton

Nevertheless, Zakrisson says some retail niches will likely stand well against e-commerce competition and there is a strong underlying need for more and cheaper flats in the larger cities, as well as infrastructure investments in the Nordic region. "The companies offering cost-efficient solutions to these issues will stand well and offer an exciting potential to a contrarian investor," he says.

Other businesses are not deemed to be as cyclical, and deal-makers on the whole are seeking assets exposed to business models that are potentially more stable, such as groceries and transportation of groceries. These tend to be less capricious as everyone has to eat, and dental groups are also a likely stable contender, says Zakrisson.

Across all sectors, business support services have proven the most popular investment for private equity buyers for the second consecutive quarter, accounting for 18.2% of buyout volume in Q1 2018, compared with 15.4% in Q4 2017. Software dealflow, which accounted for the highest proportion of buyouts in Q3 2017 at 12%, fell to 11.5% in Q4 2017 and 6.1% in the first three months of 2018.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Nordics
• Investments
• Top story
• Sweden
• Norway
• Denmark
• Finland
• Triton Partners
• Accent Equity Partners
• IK Investment Partners