Swedish stronghold secures Nordic IPO market for PE

The Nordic stock exchanges have seen 10 private-equity-backed flotations so far this year. The week from 25 November alone saw three listings, including this year's largest. IK Investment Partners listed Swedish care provider Attendo on the Stockholm bourse at the end of November, followed by EQT and Accent's Scandic flotation and EQT's IPO of Dometic at the end of November.

The Nordic region was the second-most active for private equity-backed public exits, beating France's eight, the Benelux and DACH regions' six and four, and southern Europe's seven. Only the UK and Ireland surpassed the Nordic countries, having listed 11 companies.

At 10 IPOs in the Nordic region, this year surpassed 2014's seven and equalled 2007's total as the best year for Nordic IPOs in nearly a decade.

David Kroon of Carnegie, the Nordic investment bank that has been involved in the vast majority of Nordic private-equity-backed IPOs in 2014 and 2015, says the reason for the uptick is historical: "You need to look at the years that came before, where there were nearly no IPOs in the years leading up to 2013 – extremely few – so there has been a huge backlog. Now it's the other way around, so I think it is the natural turn of the cycle."

At a market cap of SEK 14.2bn, EQT's listing of Dometic is the largest listing of the year, with IK's SEK 8bn flotation of Attendo taking second place.

This year, the combined exit value of IPOs is in excess of around €4bn – higher than any year since 2010, when Axcel floated Pandora and Chr Hansen on the Danish stock exchange at a combined market cap of €5.4bn (though the total exit value was lower, due to GPs retaining stakes at the time of listing).

Seven private-equity-backed companies were listed on the Nordic stock exchanges in 2014, making it the best year for public market exits by private equity firms since the 10-year high of 10 IPOs in 2007, according to unquote" data. A further three were listed on the US exchanges.

Volatility aversion
The Nasdaq OMX Stockholm exchange has been housing the bulk of listings for private equity firms in 2015 – as was the case in the preceding year. The exchange saw eight of the 10 listings in the Nordic market so far this year. Apart from being the largest of the Nordic bourses, a look at the 12-month all-share indices of Oslo Børs and OMX Helsinki gives an indication of why Stockholm is the preferred market for private equity.

While all-share indices for the four main Nordic markets have followed broadly the same trend line, fluctuations on the Helsinki and Oslo exchanges have been the most pronounced and jarring in the past year.

The Stockholm and Copenhagen exchanges saw softer spikes and drops, which also reflects the strength and stability of the countries' respective economies. The economic outlook for Denmark and Sweden is relatively stable, and has been for a while.

In contrast, Norway has struggled with the effects of record-low global oil prices on its largely oil- and gas-driven economy since the end of last year. Meanwhile, Finland's economic recovery remains tepid as the government implements austerity measures in an attempt to stabilise the economy.

However, the Oslo bourse was the second most popular market for private equity-backed listings last year, hosting three IPOs – including 2014's largest, the NOK 8bn float of EQT's sporting goods retailer XXL.

The Copenhagen anomaly
Despite a steady economy and the most stable stock market in the region, Nasdaq OMX Copenhagen is the odd market out in the Nordic IPO segment. Copenhagen's bourse hosted one private-equity-backed IPO in 2014 and has yet to see a single private equity asset list this year.

Furthermore, two Danish pharmaceutical companies – Egalet and Forward Pharma – chose to list on New York's Nasdaq exchange instead of Copenhagen in 2014. Ascendis Pharma chose to do the same in January this year, while Seed Capital-backed Windar Photonics opted to raise its capital on London's AIM market.

Following the listings of the pharmaceutical companies on other exchanges, president of Nasdaq OMX Copenhagen, Bjørn Sibbern, lamented that the Copenhagen bourse was not conducive enough for these types of assets, despite there already being several large pharma companies already trading on it.

"Copenhagen has a tradition of being a more fixed-income-focused market, and the public stock market is not as developed," says Carnegie's Kroon. "You can go back 20-30 years and see it has never been as active as the Swedish market, even factoring in the size difference."

OW Bunker debunked
Looking at last year's single private-equity-backed listing could be one clue to why Copenhagen is less favoured for GPs looking to list assets. Altor's DKK 5bn listing of OW Bunker – also led by Carnegie – was initially well-performing, but failed catastrophically when the company fell into bankruptcy in November 2014, just seven months after its IPO.

Bankruptcy lawyers and law enforcement are still trying to get to the bottom of OW Bunker's collapse so blame can be apportioned correctly, but in the meantime accusations have been rife, and have created some level of distrust with Danish investors when PE-backed assets are listed.

However, in the lower listing brackets, Copenhagen also struggles – for reasons unrelated to private equity. The small and mid-cap exchange in the Danish capital has seen limited activity for an extended period of time, and is a hot debate topic in the country's financial sector.

Commenting on the year's Nordic IPO activity, Nordic head of advisory and ECM for Nordea Harald Grøn told unquote": "Sweden has more of a tradition of listing small companies than Denmark does. Additionally, there are a lot of private-equity-owned companies in Sweden, and many of these owners have chosen an exit via IPO because of the high stock prices."

This view is supported by Sibbern, who said in a recent article by Danish financial newspaper Børsen that he advises small and medium-sized companies considering IPOs to list in Stockholm, where the market for small and mid-cap assets is more developed and in higher demand.

Seed Capital's choice to list Windar in London is one possible example of this. When announcing the listing, the Danish VC's managing partner Ulla Brockenhuus-Schack said: "The process of the listing has been faster than we expected and that is a lesson we will take with us. Raising capital this way is definitely something that we will consider in the future. I would like for Denmark to have an equally well functioning small-cap stock exchange. This would greatly benefit small Danish businesses."

Though 2015 looks likely to be a quiet year for private equity IPOs in Denmark, one listing on the Copenhagen market has already been tabled for 2016: Goldman Sach's IPO of Dong is estimated to reach a market cap of at least DKK 80bn, making it one of the largest-ever private-equity-backed listings in the Nordic region.

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