GP Profile: Verdane looks to step up portfolio deal deployment

Verdane manages three separate strategies, all of which focus on European technology companies. Its Verdane Capital strategy is the only series of funds that invests in portfolio deals, in which the firm acquires several stakes at once from the portfolio of one seller. The strategy targets minority and majority stake deals via both direct investments and portfolio deals, deploying equity tickets ranging from EUR 8m to EUR 150m.

Verdane Capital XI was registered in May 2022 with a USD 1.17bn target, indicating that more capital will be collected for its direct and portfolio deals strategy before too long. However, Verdane declined to comment on fundraising.

Merle Price, Verdane

Price told Unquote that a number of factors could drive portfolio opportunities in the current market. “As owners try to manoeuvre through some more difficult macro situations, be it through a strategy shift, needing liquidity for fundraising, or de-risking their exposure, they will look to sell parts of their portfolios,” she said. “We have bought from both GPs and corporates with a VC arm who might want to discontinue that part of their business or get new active owners on board."

Recent vendors in Verdane’s portfolio deals include venture capital firm Amp Eleven; Verdane acquired a mixed portfolio including financial and consumer technology companies, with the aim of providing further investment capacity for their growth.

The changed public markets environment is also a motivator for some sellers, Aspen said. “Before this year, we had been in a frothy market for a couple of years – there were 130 tech IPOs in the Nordics last year, and when that route is less open, the relevance for us as a portfolio acquirer becomes greater,” he said. “People don’t want to sell when there is too much uncertainty, but we believe that we can find suitable solutions for all types of sellers.”

When it comes to executing portfolio deals, the current environment has also affected the timeline of processes, according to Aspen. “You get more time at the moment as a potential buyer, so you get to learn more about the company, sectors, and current trading,” he said. “Last year, processes were really pushed, with short timelines, but overall processes have become longer, with timelines increasing by around 50%, and processes have become less broad. Over the years, we’ve made more than 400 investments, and exited more than 300, so we have got a lot of data that we can use to review a company in a longer process.”

Strong pipeline
In addition to its Verdane Capital strategy, Verdane’s Edda funds make investments of EUR 10m- EUR150m in high-growth companies.The GP’s newest strategy is known as Verdane Idun, taking its name from the Norse goddess of spring and youth; the debut fund in the impact strategy held a final close in January 2022 on EUR 300m and invests EUR 10m-EUR 15m per deal, focusing on technology-backed businesses operating in line with the themes of energy transition, sustainable consumption, and resilient communities.

According to Unquote Data, Verdane has made 23 new deals (including portfolio deals) and exits to date in 2022. With three funds to deploy, Verdane is continuing to assess new opportunities that it sees in the current climate. “We’re continuously making investments and exits,” Aspen told Unquote. “For investments, we are keen to understand how the underlying market will be affected in this climate. It differs from sector to sector and market to market – for example. Norway is not dependent on external gas supply, whereas there is more uncertainty in Germany.”

In spite of these challenges, the GP remains positive about its pipeline prospects for 2021. “Most of our deals are proprietary and we have a strong pipeline,” Aspen said. “We’re expecting to continue our usual level of activity in direct deals in 2023, but it will be a stronger than normal deployment year for portfolio deals.”

Price, who is based in Denmark and joined Verdane earlier in 2022, highlighted the importance of this geography in the firm’s ongoing deployment. “Denmark is one of the countries where we have recently expanded our focus and grown the team from two to seven to accommodate the inbound dealflow and opportunities we’re seeing,” she said. “We’re able to access the local ecosystem and bring in our international expertise.”

The GP’s recent investments in Denmark include online pharmacy platform Apoteka, as well as Internet of Things (IoT) global cellular operator Onomondo, both of which were announced in July 2022.

The UK is another geography where Verdane sees opportunities; the firm hired former Ericsson head of M&A Helena Svancar as a partner in its London office in September 2022. “We’ve also ramped up our London office and we now have more than 10 people there, including three partners,” Price said. “We’re looking to build on the success we’ve had in the past doing portfolio deals in the UK.”

Operational emphasis
While it sources new deals, Verdane is supported by a 35-strong “in-house operational expert team” made up of data scientists, online marketing experts, and people with pricing and technology expertise, Price told Unquote. “Being able to draw on their knowledge and skills, starting at the sourcing and through to exit, has educated us as a team and allows us to create greater value for our companies, with improved knowledge transfer since it’s not just an external provider coming in and doing due diligence,” she said.

“I think having this type of team is much more common in the US, but we’ve not seen it so much in Europe,” Aspen added, nothing that this is a differentiating factor when it comes to European technology investors. “We’ve ramped up this team in the last four years. Our companies send us data using APIs on a daily basis, which is always good to look at if you are planning to make investments in the sector – you can see how live data is developing and we use it to validate our investment hypotheses.”

Verdane has a total team of 100, 57 of whom are investment professionals. In addition to its Oslo headquarters, the GP has offices in Berlin, Copenhagen, Helsinki, London and Stockholm.
“Overall, we’re continuing to grow as a team, and we’re trying to find companies riding long term growth trends, such as the fact that more and more software services are becoming cloud-based,” Aspen said. “We are on the ground in six countries, but it’s more about understanding the sector and clusters,” he added.

 

[Editor's note: The first paragraph has been updated post publication to note that Verdane will also continue to focus on direct investments.]

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