Attracting tech talent top priority for Nordic GPs

Kasper Viio, corporate development executive at Unquote parent company Acuris, kicked off the 2018 Nordic Private Equity Forum by sharing top-level statistics with the audience. As European fundraising has cooled down this year, GPs in the Nordic region have conversely ramped up the pace, according to Unquote Data. However, Viio noted that large-cap fund closes from EQT Partners and Nordic Capital have somewhat distorted the picture.

Even accounting for this, mid-market fundraising has showed resilience, with GPs including Axcel, Litorina, Pamica and Verdane Capital Partners capping successful raises this year. Representatives of many of these firms were in attendance and contributed to lively panel discussions that explored the reasons for the region's historical success, as well as considering the main challenges it was facing and was likely to face in the future.

This region is driven by innovation, and we have seen several iconic businesses in the tech space from the Nordic countries" – Ola Nordquist, Permira

A strength of the region is the general population's familiarity with private equity and financial capital markets generally, according to IK Investment Partners' Alireza Etemad. "In the Nordic region, you grow up as a kid knowing what a share is," the partner said. "There's an equity culture in this region that attracts a lot of good companies and capital."

However, Cubera Private Equity partner Johan Nord and Skandia Private Equity senior investment manager Sofie Kulp-Tåg both highlighted the relative lack of private equity penetration in the Nordic region and Europe generally when compared with North America. "Looking at Nordic funds, they are roughly 5% of the market cap of the listed share indexes in the region and that figure has been around 4-5% for many years," said Nord. "I don't see any reason why it shouldn't be 7.5%."

Challenges
Nordic Capital CFO Klas Tikkanen, FSN Capital partner Peter Möller and Permira partner Ola Nordquist shared a panel moderated by Goodwin private equity partner Ed Hall to discuss the Nordic region's macroeconomic outlook. All three panelists agreed that a dwindling labour force was among the chief concerns for private equity firms. "There is a fight for talent," said Möller. "It's not just about offering the right financial package. There's a focus on soft factors like empowerment and helping people to grow in the workplace to make sure you can attract and retain the best and the brightest."

"Nordic Capital's companies are struggling to find software engineers," said Tikkanen, "and tend to end up placing new capacity down on the continent or in the Baltic countries, instead of in Sweden. There are many issues such as housing, labour taxes and getting people the right permits to work (especially from outside of Europe)." He added that there was political will to address this issue: "I've spoken to the incoming mayor of Stockholm, Anna König Jerlmyr, and she gets it. It's on her agenda to fix."

Verdane Capital partner Pål Malmros acknowledged this difficulty on another panel, but also highlighted the advantages of compressed salary structures in the region. "Engineers are relatively cheap in the Nordic region," he explained. This is particularly helpful at an early stage, as technology can be developed more efficiently, but bringing in the right talent at the later stages still presents a problem."

"We have great talent to build software companies from inception to 100 employees," said Malmros. "But then to scale internationally you need heads of sales etc, and it's more of a challenge to attract the right people, although it is getting easier over time."

Even so, the Nordic region has produced its fair share of high-performing, PE-backed technology companies. "Technology is everywhere and the Nordic region is punching above its weight in this area," said Permira's Nordquist. "This region is driven by innovation, and we have seen several iconic businesses in the tech space from the Nordic countries." Companies such as Spotify, iZettle and Klarna were referenced throughout the day.

Creandum principal Bjarke Staun-Olsen told the audience: "The number one determinant of an ecosystem being good for creating big tech companies is that it's already created big tech companies." If that is the case, Nordic private equity firms will have no shortage of confidence in their technology investments.

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