Deal in focus: Altor fully exits listed-Byggmax

Altor has now fully exited Nordic discount DIY retailer Byggmax through a second round of share sell-offs. Its most recent divestment effort saw the private equity firm sell its remaining 19.6% stake at SEK 53.5 per share. Byggmax made its debut on the Nasdaq OMX Stockholm in May 2010, with shares priced at between SEK 46-57 each.

Having first invested in the company in 2005, the relaxed pace of the Bygmaxx investment is a neat example of the congenial relationship between the asset class and public investors in the Nordic region.

In the UK, the sheer volume of sponsor-backed IPOs over the last six months, which shows little signs of abating, is beginning to cause concern as market commentators start to question the quality of assets coming to market. Furthermore, the previous IPO window enjoyed by private equity prior to the downturn left a bitter taste in the mouth of many institutional investors stung by dramatic drops in share prices of formerly private equity-backed companies.

Gradual sell-down highlights harmonious relationship between PE and public markets in Nordic region

However, in the Nordic region, a clear and admirable focus on maintaining harmony between private equity and public market investors makes for a far more sustainable market. "It is vital that listed assets continue to do well after the IPO," says Tor Krusell, head of communications at Altor. "We can't be too narrow minded; focusing only on the exit and the short term, instead we must think about the market as a whole; about relationships between private equity and investors. Byggmax is a good example of sticking to that focus as we remained in the company four years after the IPO."

Ikea tradition
What's more, Byggmax's growth story since Altor's investment in 2005 has resulted in its current healthy status, and decent prospects for continued expansion. "This is a classic Swedish business, which was very entrepreneurially driven," says Krusell. "When we came into contact with it in 2005 and acquired them the following year, Byggmax had reached a challenging point in its expansion, giving us an opportunity to invest." In late-2005, Altor acquired a 75% stake in the business with management holding onto the remaining 25%, in a deal supported by DnB Nor.

Over the past eight years, Altor has supported Byggmax's impressive growth, increasing store numbers from 27 to more than 150 today and tripling sales revenue. The company moved beyond its domestic base in Sweden to neighbouring markets Finland and Norway.

The key to Byggmax's growth has been its continued focus on its particular niche – discount DIY products; following in the footsteps of one of Sweden's most famous retailers, Ikea. In order to provide customers with deep discounts Bygmaxx carries a smaller product range compared to its competitors. Furthermore, it has positioned its stores in non-central locations as a means of further reducing costs, and employing fewer staff with the implementation of self-service technology. According to Krusell, another key method for stripping out costs was the ability to store a number of products outside to increase space efficiency.

With these clear cost-saving strategies in place, further expansion of Byggmax is firmly on the cards, aided by Altor partner Stefan Linder, who is to remain on the company's board for another year.

With the IPO bug taking hold of the Swedish private equity market, European private equity practitioners should take note of the careful and sustainable processes carried out in the Nordic region. According to Krusell, a number of Altor's existing portfolio companies are considering an IPO in the near future, with debt collector Lindorff being discussed most widely. "Lindorff is one possible candidate among several other companies that would suit going for an IPO, but these companies could equally go to trade – it will come down to what is best for the company," says Krusell.

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• Topics
• Exits
• Nordics
• Altor
• Sweden
• Norway
• Finland
• IPO