Nordic fundraising market remains buoyant despite dealflow dip

To May 2017, nine Nordic-based funds have held final closes, securing a total of €3.84bn. The largest of these is EQT's dedicated mid-market vehicle, which closed on its €1.6bn hard-cap in May.

With GPs including Nordic Capital and Axcel on the road, understood to be targeting €4bn and €550m respectively, 2017 looks set to comfortably outstrip 2016’s fundraising in the region, justifying the positivity seen from market participants throughout the Nordic Fundraising Report.

As highlighted in a recent unquote" analysis piece, dealflow in the early part of 2017 for buyout deals in the Nordic region saw a marked slowdown in both buyouts and exits, with Q1 the worst for private equity activity since the fourth quarter of 2013. To the end of May 2017, unquote” data has tracked 49 deals in the region with a combined value of €4.5bn.

With increasing competition and mountains of dry powder waiting to be deployed, the increase in average deal value is not surprising, nor is the fall in volume, as GPs are wary of paying over the odds for assets in a market where pricing has steadily increased. With the fundraising picture looking positive for the remainder of 2017, adding to the volume of capital to be deployed, it will be interesting to see if this trend continues.

Funds holding a final close in Jan-May 2017*
Fund	Total Raised (€m)
EQT Mid Market Europe	1,600.00
Summa Equity Fund I	484.8
Cubera VIII	405
Dansk Vækstkapital II	388.8
Procuritas Capital Investors VI	318
Vaaka Partners Buyout Fund III	225
Erhvervsinvest IV	196.2
Sentica Buyout V	185
Vendep Capital Fund II	40

* Excludes EQT Infrastructure III, which closed on €4bn in February 2017. The fund will invest primarily in infrastructure, but will also make buyout deals.

2016 in review
Nordic private equity fundraising saw a significant drop in total capital committed in 2016, despite the number of funds raised increasing markedly. A total of more than €5.9bn was raised by 16 locally-managed funds holding final closes during the year, where 2015 saw more than €7.5bn raised by nine funds.

This marks the third consecutive year of decreasing total capital raised by funds managed in the region, a pattern that is in stark contrast to a broad trend of increasing capital inflows across Europe. This broader trend is very noticeable when looking at funds managed elsewhere with a mandate to invest in the Nordic region, where 57 funds closed almost €55bn in 2016, up from €38bn in 2015.

Local players in the Nordic region typically raise smaller, locally denominated funds, the size of which reflects the segments of the market in which they operate. With a handful of well-established GPs operating in the large-cap space becoming pan-European, the size of their funds has increased with their geographical remit.

Nordic fundraising statistics are, therefore, prone to being heavily skewed by these players raising comparatively large funds, and so it’s important to look in-depth at the funds raised to gauge the strength of the fundraising market in the region.

For instance, 2016 was notable for regional GPs holding final closes for late-generation funds. Verdane Capital closed its ninth fund after a four-month fundraise, while Northzone closed their eighth, and Norvestor their seventh vehicle, each with a significant presence from Nordic LPs. All but three funds holding final closes in 2016 are third-generation or later, and two of the remainder are EQT funds with non-core strategies.

The size of funds reflects the markets that these GPs operate in and current currency valuations Therefore, aggregate total of funds raised when looked at in euros, while small in comparison to other European regions, does not accurately measure the strength of the private equity climate in the Nordic countries. Overall, despite a fall in the total capital raised, the data on Nordic private equity fundraising during 2016 paints a picture of a healthy market of established fund managers operating in their local markets.

Looking at Nordic-managed funds holding final closes in 2015, EQT VII closed on €6.75bn in August 2015, which accounted for almost 89% of the entire private equity fundraising market in the region. Examining LPs in the fund in detail, 26% of them were from the Nordic region, committing a total of €1.43bn. Given the relatively few smaller GPs closing funds during 2015 – the fewest since 2012 – the presence of a large player in a relatively small market seems to monopolise a large section of LPs’ annual private equity allocations.

Click here to read the rest of the 2017 Nordic Fundraising Report, published in association with Aztec Group

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• Topics
• Nordics
• Fundraising
• Unquote Data
• Nordic Outlook
• Erhvervsinvest
• Sentica Partners
• Axcel