Nordic private equity's 2012 highlights

Palamon makes 3.4x on coffee sale – Herkules Capital bought 90% of Espresso House, a Swedish coffee house chain, from Palamon Capital Partners for a reported €100m in September. Palamon sold Espresso House for an impressive 3.4x multiple, after it increased its EBITDA by 10x and saw a 30% annual revenue growth during Palamon's holding period. Acquired in 2006, the coffee chain was an early investment from Palamon's second fund. Espresso House has 12 outlets across 25 Swedish cities, currently generating annual revenues of SEK 560m.

IK bags fitness centers – IK Investment Partners bought Swedish health and fitness chain Actic Group from FSN Capital Partners. Norwegian newspaper Finansavisen has reported the deal to be worth between SEK 800-900m. Actic has 143 health and fitness clubs and around 200,000 members across six countries. Sweden, Norway and Germany are its most important markets.

Swedish tax man cracks down – The Swedish tax authority (Skatteverket) has been scrutinising the Swedish private equity business for years, and in 2012 Nordic Capital became the first firm ever to sit in court over its carried interest. On 6 December, Skatteverket won its case to have carried interest deemed as employment income. In the absence of an appeal, the GPs' tax repayments are supposed to be in the tax authority's account by 26 January.

The decision will mean tax on carried interest would rise from 25% to 56%. The increased tax rate together with the additional employment fees means NC Advisory will pay a total of SEK 702m to Skatteverket. Thirty four partners in Nordic Capital and IK Investment Partners could be forced to pay SEK 2.6bn in taxes in total. The two most famous Swedish private equity investors, Björn Savén and Harald Mix from IK Investment Partners, have a mutual tax bill of close to SEK 1.1bn. According to Dagens Industri, Savén alone could owe as much as SEK 875m.

Nordic Capital announced they will appeal the court's decision. Nordic Capital representatives have expressed concern this might wipe out large parts of the Swedish private equity industry if the verdict persists. There is a great chance the ruling could be reversed after an appeal, however. Skatteverket has asserted they intend to examine seven or eight other private equity firms within the near future. According to reports, EQT, Altor and Triton could be next in line.

Nordic Capital cuts its fundraising target – In October, Nordic Capital felt the pain of the difficult economic climate and cut its target for its latest buyout fund. The private equity firm told investors it would seek 25% less than the €4bn it initially targeted.

The Stockholm-based firm began marketing the fund in April after EQT raised €4.75bn in 2011 for a northern Europe-focused fund.

Nordic Capital made six acquisitions in total last year. The most recent investment took place in July 2012, when the GP acquired Resurs Bank, Solid Försäkringar, Reda Inkasso and Teleresurs.

EQT still holding onto ISS – Despite EQT's attempts to offload Danish cleaning firm ISS last year, it still owns the firm and was forced to seek a partial sale. With an IPO abandoned and a sale to British security firm G4S falling through following a shareholder rebellion in 2011, EQT has been exploring other sale options this year.

Apax Partners made a €6.5bn bid that was rejected by EQT and Goldman Sachs in favour of a new stock market listing in March, but those plans were also put to rest after the Japanese earthquake and the knock-on effect on markets.

In August, ISS received a €500m investment for a 26% stake in ISS from Ontario Teachers' Pension Plan and KIRKBI Invest AS, which invests funds from the family behind Lego toys.

ISS chairman Ole Andersen spoke of an initial public offering "within a few years" as he announced the deal at the end of the summer.

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