Nordic GPs set their sights on the DACH region

Nordic private equity firms have ramped up their investment pace in the DACH region in recent years, with some opening new offices to support this deployment.

Altor Equity Partners was the latest of the region's GPs to announce its expansion into DACH. The firm opened an office in Switzerland last year and made the official announcement simultaneously with the news it had wrapped up its latest fundraise on its €2.5bn hard-cap in January.

Klas Johansson, a partner at Altor's newly launched Zurich office, thinks that cultural and linguistic similarities are a key driver behind the ongoing trend. "A lot of other firms from outside the DACH region have opened up offices there with some success over the past few years," he says. "As a Nordic fund, it is a region where we are relatively at home in terms of management style and business culture and in the past we have successfully acquired in DACH for our portfolio companies."

EQT was the first mover in this category, opening a Munich office in 1999 and inking its first DACH deal in 2001 with the buyout of Leybold Optics. Since then it has allocated around a third of its deployed capital to the region, completing 108 buyouts for an enterprise value of almost €27bn.

The region's other giant, Nordic Capital has also increased its investment activity in the region. The firm has made a total of 11 DACH buyouts since 2000, five of which have been completed since December 2017. IK Investment Partners, no longer officially a Nordic firm, also has a long history of investing in the region, completing 22 deals since inception.

Standing on the shoulders of giants
More recently, FSN Capital followed in their footsteps, setting up in Munich in March last year after hiring from Apax and Capvis. The firm closed its first deal since setting up with the tertiary buyout of car parts retailer Rameder from Findos.

A mid-market DACH-based GP tells Unquote on the condition of anonymity that newcomers to the market are struggling to source primary deals and to be added to auction lists. However, Altor's Johansson is not overly concerned about this. "We are opening a new office, but the kind of deals we are looking at will be much the same as the kind of deals we were looking at before in areas where we have experience and network," he says.

Johansson says that Altor's business model will match the concerns of Mittelstand company owners and managers. "We have the ability to do minority stake acquisitions and we have quite a lot of experience with that type of transaction," he says. "I think it will resonate well with Mittelstand business owners. I know a lot of firms have the capability but not many are using it very often. We also have a longer average holding period, which is an affirmation of our commitment to working with companies to make them better - in a sustainable way."

As a Nordic fund, it is a region where we are relatively at home in terms of management style and business culture" – Klas Johannson, Altor Equity Partners

Rather than hiring from rival DACH firms like FSN, Altor has elected to keep the team in Switzerland small and use the Stockholm office for extra capacity and ensure its distinctive approach is maintained. "We have hired Giovanna [Maag] for the local knowledge aspect and I have made the move to ensure the continuity of the Altor DNA. However, we will deliberately keep the office a bit understaffed, because we want to draw on the resources of Stockholm and ensure we continue to work as one team. It is important to hire native speakers and we will make a couple more hires on associate and director level throughout the year but we did not want to bring in an entirely new team."

Whether this approach will prove a success is yet to be seen. But Altor announced when closing its latest fund that its realised total returns since inception have generated a gross IRR of 35% and a money multiple of 3.7x, and its deals outside of the Nordic region are understood to be among its best.

"So far the experience has been very positive," says Johansson. "Not only have we generated good primary origination opportunities, we have expanded our network in general. This is also useful for other things such as finding bolt-on opportunities or hiring for ourselves or our portfolio companies."

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

• Topics
• Nordics
• DACH
• Investments
• GPs
• Top story
• Sweden
• Denmark
• Norway
• Finland
• Germany
• Austria
• Switzerland
• Altor