Eqvitec doubles mezzanine fund size

Eqvitec Partners closed its third mezzanine fund in March on EUR103m, just surpassing its EUR100m target. The fund, which is double the size of its predecessor, held a first close in July last year with commitments of EUR64m. At the final close, the fund had secured commitments from 12 investors, of which half where incumbent.

As with the previous mezzanine funds, the new vehicle aims to support buyouts and recapitalisations in Nordic small to medium-sized companies. Eqvitec's head of mezzanine Pertti Nurmio says the fund has several deals in the pipeline under consideration, particularly from Sweden, the majority of which are buyouts. He describes deal flow as being on par with the latter part of 2008, and "definitely stronger" than two years ago. The lack of available senior debt makes mezzanine an attractive opportunity for buyout firms. Furthermore, Eqvitec's investments preferably range between EUR5-15m, which fits well in the lower valuations in the current market. "There are hardly any deals exceeding EUR100m in enterprise value in the region," Nurmio says.

Despite a healthy deal flow, mezzanine is not isolated from the impacts of distressed financial markets and the downturn in the economy. Financial risk may now be lower but business risk is higher due to poor visibility. "We must of course be very prudent in the credit evaluation of target companies, particularly by ensuring that both the structure of the mezzanine package and the overall capital structure are in line with those risks" says Nurmio. "We must be realistic and allow room for weakening profitability," he concludes.

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