Nordic Capital nears EUR 9bn final close for Fund XI

The fund is already investing and is set to be 50% larger than its predecessor and took six months to raise, Nordic’s COO Klas Tikkannen said, speaking at the same panel in the event.

Church and Tikkanen reflected on how Nordic Capital’s strategy has been developed since a generational change that the firm underwent around 10 years ago. In the subsequent refinement of its strategy, the firm concluded that its “secret sauce” was its proactive sourcing strategy and its sector knowledge, Tikkanen said.

This proactive sourcing has seen the GP develop a “shadow portfolio”, Tikkanen said. This comprises an active dialogue with and a “desktop analysis” of potential portfolio companies, he said, as opposed to simply trying to preempt auctions that could well come to market in the next six months.

In Nordic Capital’s fully deployed Fund X, the average tracking time for the vehicle’s investments was two years, with one third of its investments having been tracked for four, Tikkanen said. All of its portfolio companies were once part of the shadow portfolio, with half made on an exclusive basis, he said.

The firm’s sector specialisation has seen it focus on technology, financial services and healthcare, Tikkanen said, noting that any deals that might have dragged the GP’s performance down in the past were likely made in sectors in which it did not have this specialised experience. The firm has a 105-strong investment team focusing on 13 sub-sectors and the GP consistently reviews these, he added.

In addressing the current macroeconomic environment, Nordic Capital has assembled a task force to model different scenarios, incorporating external experts. Beginning in February 2022, the firm has looked into scenarios including “stagflation” and a “hard landing”, publishing its views periodically.

Asked about any lessons that the firm has taken away over the course of its history, Tikkanen said that it has learned that, when it comes to LPs, sponsors should “come to them early and say a lot”. This is particularly important for ideas that might prove more controversial, such as continuation funds, he said.

When it comes to future proofing the firm, Nordic Capital will be “turning over every stone” when it comes to deal sourcing, Tikkanen said. He also highlighted political sentiment as a potential risk to the private equity industry, noting that the firm is planning to “beef up” its public affairs capabilities as part of broader efforts to communicate about what the private equity market is doing.

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