2008 DVCA Toplederconference

TDC controversy

Two years after the EUR10bn TDC mega-deal, the five buyout houses that completed the transaction are still being scrutinised by the Danish media and public. One of the owners, Kohlberg Kravis Roberts, represented by partner Oliver Haarmann and director Henrik Kraft, presented the background to the acquisition and the strategies to improve operational effectiveness in the telecoms business for the first time. The controversy surrounding the TDC buyout resulted in increased taxation of all private equity funds by the Danish government. The audience asked some critical questions about the process and the shortcomings of the buyout procedure. A negative public image of the asset class was also fuelled by the deal. When Haarmann was asked how this could have been avoided, he pointed out that bringing the minor shareholders to court to force them to sell (which they lost) was a mistake and alternative options should have been chosen. Transparency should also have been better.

Measuring performance

Lauge Sletting of Northsea Capital and Jonas Agesand of LGT Capital Partners presented figures on exit returns for both buyout and venture funds. Both noted the strong returns that Nordic players have produced recently, second to the UK in Europe. Agesand highlighted the pool of management talent, the large industrial base, well functioning stock markets and cultural homogeneity as the Nordic advantages. Looking at exit statistics from a sample of 370 buyout exits in the Nordic region during the 1983-2007 period, Agesand also remarked that overall large buyouts have outperformed the mid-cap segment, and mid-caps have in turn outperformed small-cap buyouts from 1983-2007. However, Agesand also pointed out that the dispersion of returns is significantly higher at the smaller end of the market. He found that top quartile returns for small buyouts outperformed mid-market buyout returns that, in turn, outperformed large buyout returns at the top quartile.

Sletting highlighted that European first-time funds have outperformed other funds on exit returns (cash in and out).

Cleantech, Walker Review and prices

Cleantech is recognised to have become our era's dot com. Per Anders Enkvist, associate at McKinsey & Co, highlighted the necessity for more capital to be injected into cleantech companies due to rapidly increasing demand. The European Union is taking the lead with the 20/20/20 target (see feature, page 12) but progress in the US has been slow following its continued failure to comply with the Kyoto Protocol. California is a noteworthy exception in the US. Enkvist stated that, along with a change in attitudes towards energy efficiency, chronically increasing oil prices also add to the strong argument for alternative energy sources.

The Danes have also started to work on a Danish "Walker Review" with an appointed committee of industry professionals and advisers who will present the report in the coming summer.

Other topics discussed on the day were "Trends in the international economy and Denmark's position" by chief economist Steen Bocian of Danske Bank, and Danish taxation minister Kristian Jensen's thoughts on possible reforms to increase Danish competitiveness and innovation.

The DVCA also held its first awards the same evening to celebrate the best Danish achievements of the year: Polaris Private Equity was crowned buyout house of the year; 3i Nordic Denmark won the deal of the year category for the Damcos A/S exit; and Mads Leth Christiansen was named this year's business angel.

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