Norway facing quietest year for private equity in a decade

As a major oil producer, Norway's economy is heavily linked to the global oil markets, and as the price of Brent crude settles around the lowest price per barrel for nearly a decade, Norwegian private equity activity appears to be suffering.

The effect of the tanking oil economy on the Norwegian economy is reflected in figures from Statistisk Sentralbyrå (SSB), the Norwegian central bureau of statistics.

SSB's data shows GDP growth fell by 0.7% from 0.9% in Q4 2014 to 0.2% in Q1 2015. While mainland GDP grew by 0.5%, offshore GDP fell by 0.7% and investment on the Norwegian mainland fell by 0.3% in the same period.

Unsurprisingly, investment in industrials and mining fell by 20%, with particularly strong drops in investments in resource-based industries and shipbuilding.

While the Oslo Stock Exchange All Share Index reached its 12-month peak on 15 April this year, at 711.22, the market started to decline during the remainder of Q2, and has been on a downward slope since, dropping 40 points from its April peak. The Oslo stock exchange has been rising since the worst shocks to the global oil market hit around December last year, but has felt some secondary shocks from the Greek crisis.

Nordic Capital's Europris, which listed in June with a NOK 8.7bn market cap at NOK 43 per share, had an active first month on the Oslo stock exchange, dipping to NOK 39.10 per share, rebounding to NOK 44 and closing at NOK 41.80 per share at the end of July. 

Low activity
For the first half of 2015, buyout volume in Norway was a third of that recorded for all of 2014, with seven deals completed so far compared with 21 last year, according to unquote" data. Meanwhile, deal value dropped by €5.4bn in the first half of 2015 compared to all of 2014. However, last year's figures were somewhat inflated by the €2.2bn SBO of debt collection agency Lindorff.

Of the approximately €760m invested in the first half of the year, two deals make up nearly all of the value: Apax Partners' €502m take-private of IT company Evry and Herkules Capital's buyout of GMT Communications Partners's Seagull Group, with an estimated EV of around €100m.

However, if the H1 2015 volume and value trends continue for the second half of the year, Norway will be on track for the lowest overall deal value in five years – while deal volume will be on par with 2013 and 2014.

Glass half full
Some solace may be found in the fact that H2 has seen higher total deal value than H1 in four of the five previous years, though only in 2012 did H2 see more than 20% growth compared to H1.

Norwegian deal value in the last six months of 2015 would have to be in the vicinity of €4.4bn to match 2014's total value after discounting Lindorff – 6.7 times the current value of all buyouts in H1.

Exits have also taken a hit, with volume in the first half of 2015 at a third of the total number of exits last year. Likewise, exit value is less than a 20th of that recorded for all of 2014, though once again the Lindorff SBO skews the figure for 2014, as it counts as an exit for Altor and a buyout for Nordic Capital. Subtracting €2.2bn puts overall exit value for 2014 at €2.8bn, still more than 10x the €229m overall value of Norwegian exits in 2015 so far.

If H2 2015 posts similar volume and value levels as H1, 2015 will be the worst year for Norwegian private equity and venture capital exits in a decade, at a quarter of the volume and less than half the value of previous low-point 2013.

Though the remainder of 2015 may bring some big deals to push private equity activity more in line with previous years, what 2015 has shown so far promises a year greyer than Oslo in October.

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• Topics
• Nordics
• Performance
• Norway
• Top story
• Nordic Capital
• Altor
• Apax Partners
• Herkules Capital
• GMT Communications Partners
• unq2015sep