Investors debate fund-size and specialisation at Nordic Forum

Monalotte Theorell Christofferson, from the Swedish Private Equity and Venture Capital Association, chaired Unquote's Nordic Private Equity Forum in Stockholm last week, and began with a popular message: "I truly believe that private equity is the catalyst for entrepreneurs who want to build the best and most stable sustainable companies in the world."

However, Theorell did acknowledge some of the challenges that the industry faces, highlighting the need for action on gender diversity in private equity through an analogy with the football industry: "I believe that if the football industry can change by setting goals, so can the private equity industry. The number of women is still low but there are initiatives to rectify this; most notably, Level20 has the goal of putting 20% of women in senior industry positions."

Additionally, Theorell highlighted the advantages that PE has in affecting this kind of change: "PE always has a long-term view, influence over strategy and the means of capital, network and confidence to ensure that our portfolio companies contribute to the future. I believe that equal gender opportunities within PE will lead to more diverse entrepreneurship."

The LP view
Representatives of LPs including Skandia Mutual Life Insurance Company, EQ Asset Management, Access Capital Partners and the European Investment Fund took part in a panel on allocating capital to the Nordic region.

"From a historical perspective, the number of deals has been increasing all the time. It's a fairly pricey environment, but PE still finds companies at OK prices with a lot of growth potential", said EQ's head of private equity, Staffan Jåfs. Unquote Data supports this assertion, showing that the number of buyouts has increased steadily every year since 2012. However, H1 2019 showed a fairly significant drop down to 493 from 529 in H2 2018, suggesting that this trend could be arrested in 2019.

Jåfs added: "It's important for GPs to make use of the full investment period rather than deploying quickly so that they can come back to market before the fundraising window shuts." Based on this logic, a slight dip in activity could be a positive thing. Access Capital Partners' Mikko Moilanen also shared some of these concerns, and told the panel: "In the Nordic countries over the past couple of years we've been cautious about new fund investments, because, on the primary side, we see pricing has crept up higher than the rest of Europe."

Moilanen also highlighted fund-size increases as a potential issue: "It's a function of the market now that no one bothers to raise €100m for a first-time fund; they just go straight to €200m."

Adelis Equity Partners' Rasmus Molander defended fund-size increases on a panel tackling the topic of specialisation and diversification of private equity funds. "It's hard to raise more than €250m for a single-country fund in the Nordic region, though a Swedish fund can be somewhat larger. Concurrently, the large firms have been successful, raising ever larger funds – but in the €400m-1bn segment there's less competition than you might think, so that's where we want to play.

"For us, sector specialisation is increasingly important, specifically IT services, life sciences and technical building services. Over time, the next step might be to look outside the Nordic region within these sectors."

Agilitas's Martin Calderbank highlighted the importance of maintaining a specialism: "High returns in PE seem to be correlated to the distinctiveness of the investor's strategy – their capability to add value. We invest in niche sub-sectors, which we understand well, where there may be few potential targets in any particular country, and to support transformations in which we have developed particular expertise. It will take us three or four years of pan-European sector work in these niches before we are comfortable making an investment, and we only invest in European countries where we have a native speaker of the language on the team."

The most often cited differentiator for PE firms after sector specialisation was their digital strategy. On a panel about digital transformation, Nordic Capital's Martin Jacobsson summarised his firm's current approach: "Providing a strong toolkit to support companies to drive digitalisation is key; at Nordic Capital, cross-portfolio initiatives like recommended digital accelerator partners, common near-shoring centres and digital procurement solutions have shown great results."

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• Topics
• Nordics
• GPs
• LPs
• Sweden
• Agilitas
• Adelis Equity Partners