Floating the idea of more Nordic IPOs

Stockholm's private equity community shares the sentiment that the IPO pipeline is filling up, a trend highlighted by the recent listing of EQT-owned bath and toilet maker Sanitec. It marked Sweden's biggest IPO in seven years, since ventilation firm Lindab's flotation in 2006. Sanitec shares started trading on 10 December at SEK 61, giving the company a valuation of SEK 6.1bn.

In addition to Sanitec, a few other IPO candidates are lining up. Debt collector Lindorff, co-owned by Altor and investment firm Investor since 2008, might also be ready for a listing on the Stockholm bourse. Altor's founding partner Harald Mix has said Lindorff, with an enterprise value of around $2.13bn, is an exciting case for the stock exchange. The company could list in Q1 2014 at the earliest, but it will most likely take place during the second half of 2014 or later, according to sources close to the situation.

Testing the waters
Due to the still subdued trading climate, Sanitec is seen as a test of investor inclination ahead of further potential private equity-backed IPOs in the Swedish capital. "It's psychologically important for Nordic private equity players to see a few IPOs actually happening," says Helena Stjernholm, partner at IK Investment Partners. According to Stjernholm, Scandinavia needs sizable and successful precedents to put some confidence back in the market.

While Nordic buyout activity held up well in the wake of the financial crisis, the IPO market contracted while awaiting more stable market conditions. Real estate firm Platzer, which started trading on 29 November, was the first IPO on the main list of the Stockholm stock exchange since the first half of 2011, and an order of magnitude smaller than Sanitec.

In order to lift spirits, the Stockholm Stock Exchange recently published a report dubbed An Improved Climate for Sweden's Growth, proposing new rules for the Nasdaq OMX specifically aimed at boosting SME listings. These will serve as a blueprint for all the Nordic countries, as Nasdaq OMX Nordic owns the exchanges in Stockholm, Helsinki, Copenhagen and Reykjavik.

Macro instability
While restrictive regulations may curb IPO appetite, a greater factor behind the drought in recent years is the volatility in equity markets caused by macroeconomic instability and the current rate with which private equity players can buy and sell portfolio companies among themselves. "The stock exchanges have jumped up and down, which is the opposite of what you want when you're trying to do an IPO," says Mattias Friberg, partner at law firm Roschier and member of its equity capital markets team in Stockholm.

According to Friberg: "The most important factor to consider is: are we approaching a better economic climate, which is more stable and encourages a positive trend in the business cycle? The general feeling today is that we are; it's approaching slowly but we are in the early phases of a positive trend."

This is part of a global trend of increasingly healthy and stable stock markets, as well as an uptick in European IPO activity - with private equity-backed Merlin Entertainments and Numericable as notable examples. Given that 2014 will likely be host to an abundance of exits in the Nordic private equity realm, it remains to be seen how many of these will manage to make the most of these improved IPO conditions.

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