Stable markets and high liquidity to boost Nordic exits

Karin Wasteson
13 February 2014

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The Nordic region saw disappointing dealflow in 2013, despite an open and liquid financing market - but the industry is upbeat on exit prospects for 2014. Karin Wasteson reports

"Counting the number of transactions, 2013 wasn't a very good year," says Stefan Glevén, partner at EQT. "I believe we will see increased activity during 2014, with more IPOs and strategic acquisitions." Indeed, businesses on the block may have been few and far between last year but thanks to good drivers on the sell-side, 2014 could see an abundance of exits. According to unquote" data, 2013 saw the region's lowest deal volume since 2009, with just 160 transactions recorded, compared to 219 in 2012, 208 in 2011 and 231 in 2010.

The easy access to finance is also set to continue into 2014, which should boost new deal numbers, and in turn could act as an exit route if private equity firms sell on to another financial sponsor. The trend may already be taking off as last week Accent Equity picked up Danish gift wrapping company Eurowrap Group from Maj Invest Equity.

"The liquidity level is in line with 2007," says Glevén. "In the short term this means there is easy access to attractive financing, but in the long term one could question whether risk is priced correctly. The loan financing market's strength will continue this year. Liquidity is very high and there are several forms of financing available."

As in the UK, the interest rate has been kept low in Sweden for years. But, market participants are now keeping a close eye on Stefan Ingves, CEO of Sweden's central bank Riksbanken, to see if and when he will change the rate. So far he's taken no action due to fears of a potential housing bubble.

Public appetite
In line with global capital market trends of rising stock markets, the Nordic IPO market is set to open up as an exit route over the coming months. Stockholm's bourse rose significantly during the past year and is now virtually back at the historically high level of 2007, with listings worth close to SEK 1.3tn (€153bn).

But, just as the listing bonanza was about to take off in early-December, Accent's pick 'n' mix retailer Candyking abruptly cancelled its listing on Nasdaq OMX the day before its introduction, stirring up a storm of criticism from the local financial press.

Fortunately, EQT's listing of bathroom ceramics maker Sanitec began trading on Nasdaq OMX Stockholm that same week in December, and achieved an impressive enterprise value of SEK 6.1bn.

Denmark-based ISS, backed by EQT and Goldman Sachs, has once again brought in advisers to manage its upcoming stock listing. The outsourcing giant has twice previously planned to list, in 2007 and 2011, but scrapped plans due to market volatility.

Even more encouraging was Nordic Capital's announcement this week that it will list component supplier Bufab on the Nasdaq OMX Stockholm. With the share price range currently between SEK 44-50 per share, the company could achieve a market capitalisation of between SEK 1.7-1.9bn.

Another private equity-backed listing expected to surface in coming weeks is Altor's IPO of debt collector Lindorff. First reported back in June 2013, the company is expected to be valued at around $2bn when it enters public life.

Despite a flurry of activity around IPOs, the slow sell-down process means LPs invested in Nordic-focused funds should not treat this development with too much excitement. Even EQT's mega-listing of Sanitec has left the buyout house with a chunky 40% stake.

It is well documented that public listings do not provide a clean exit route for private equity, but it would be foolish for Nordic firms to ignore the healthy public markets, and not take advantage of boosting returns through rocketing share prices.

We are delighted to announce that the 10th annual unquote" Nordic Private Equity Forum will take place on the 13th of May 2014 in Stockholm. This year's agenda will tackle the ever changing dynamics in the region, evaluate the impact of the pan-European and domestic reforms on business strategies, and examine local dealflow among other key topics.

Registration is now open. Click here for more details and to book your place.