Creandum conducts Nordic venture exit study

01 June 2008

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Creandum has conducted an exit study based on a sample size of more than 200 of Nordic (Denmark, Finland, Norway and Sweden) technology businesses, excluding life science, retail energy & environmental sectors, focusing on angel and venture investments. The data sample analyses venture-backed companies from the past 10 years.

The main findings were:

- Exit conditions are closely linked with the overall economic climate and the largest number of exits were completed from 2005-2007. M&A transactions accounted for 75% of the exits. However, the average exit value was at its highest point of EUR300m in 2000, at the height of the dotcom bubble based on the sample size.

- The software sector dominates the number of exits (46%) for a total value of EUR13.5bn in 188 companies.

- Internet services was the second most popular sector and has seen 20% of the number of divestments.

- Swedish companies created the majority of exit value with 107 exits for EUR8.5bn. Finland has seen 43 exits for a sum of EUR1.7bn, while in Denmark there have been 20 exits for a total value of EUR1.9bn. Norway saw 35 exits for EUR1.6bn over the same period.

- The average time from a company being founded to its exit was 8.4 years, meaning that the average holding period for venture capitalists is between four and five years.

- Companies that were exited three years after their foundation were the ones that were found to create the largest exit multiples. This finding indicates the value expectations curve, meaning there are higher expectations initially and thus higher exit value at this stage. Companies that were divested within this short time are primarily internet businesses.

- 26 exits were above EUR100m (20% of total).

- For the largest exits, an IPO is more common than a trade sale, especially in the dotcom heydays.

- Nordic exits represent a quarter of European exits above EUR100m between 2004-2006.

- But only six companies are classified as "homeruns" (above EUR500m), which can indicate that the Nordic market is exiting companies too early.

- There were 14 exits above EUR100m between 1999-2001, and 11 exits in the same size band between 2005-2008.

- A trade sale to a US-based corporation is the most important market for large exits, hence there is a lack of Nordic exit opportunities for large divestments.

The data used to make the analyses are compiled from Nordic unquote", Private Equity Insight, VentureOne/Source, EVCA, Thompson, Zephyr and Forvarv & Fusioner as well as public data.