Face-to-Face: Haugaard Rubin – Starting out

How did Danske Private Equity come about?

Various units within the Den Danske Bank organisation have been active in a number of private equity market segments over the years, both as investors, managers and intermediaries. We therefore had a lot of knowledge about the various elements of the business, but no co-ordinated approach to protecting and developing that knowledge. Danske Private Equity started as an offshoot of the bank’s asset management operation. In that operation senior analyst John Danielsen and myself had responsibility for managing unlisted equity assets, including equity fund interests. Based on our experience with analysing these interests, we decided to launch a fund-of-funds. At the same time, various other private equity projects were under way throughout the organisation. So that these projects would not get in each other’s way, I asked the bank’s executive management for permission to set up Danske Private Equity. Our brief is to co-ordinate existing efforts into a platform for further expansion. Thereby we fit well into the bank’s overall strategy of becoming a growth-oriented active provider of high-quality services to long-term clients.

Dan Kjerulf, a lawyer with the bank’s corporate finance division was involved in structuring

and managing all these projects and was easily persuaded to join John Danielsen and myself.

To assist John Danielsen in managing the fund-of-funds and further developing that concept, we have hired Peter Thellufsen from Unibank as well as Eva Reman from the bank’s asset management team to be our presence in Sweden.

One of the other projects under way was the IT fund now being launched as Danske eVentures. Finding the right person to build up that activity has been a challenge, because we needed someone with a background completely different from ours. We are very excited that John Helmse-Zinck has chosen to join us in that position. John Helmse-Zinck has an impressive career in the Nordic IT sector with CEO experience from several significant IT companies and experience as an independent venture capital intermediary. His skeleton crew consists of Eva Reman – mentioned earlier – and Claus Hjbjerg Andersen, formerly a senior analyst of internet/telecom shares with our asset management division.

See EVCJ deal of the month – in which John

Helmse-Zinck is chairman of CyberCity an Advent International acquisition.

Where does Danske Private Equity see itself in the context of the Nordic venture capital scene?

Danske Private Equity is unique in that it is the sole operator in the Nordic market aiming to provide a broad range of private equity investments. Our opportunities arise from the bank’s long-established relationships with the investors, in that we can help them identify their specific needs. We can then build up products in close dialogue with a handful of key investors, but still retain a clear picture of what other investors will expect from us. In certain segments, other providers have well-established operations with fine track records, particularly buyout funds. But in other segments, there is no single, large-scale operator present. For example, we are the first Nordic fund-of-funds investor of any size – there are a couple of small Finnish firms operating in the market at the moment but it is by no means crowded yet.

We also believe that by building up an organisation of some size, we will be able to achieve considerable synergies between the functions set up to cover various tasks. In this respect it is an advantage to be a part of a large organisation; we are simply not restricted by the same limitations as a traditional boutique-style private equity firm based on key individuals. Den Danske Bank has around 700 branches throughout Scandinavia from which we may get a lot of deal opportunities provided we structure the reward system properly – for example, setting aside a finders fee provision for opportunities presented to us that we eventually invest in.

At the same time, Danske Private Equity is given a quite unprecedented amount of freedom by the bank, which we regard as freedom under responsibility toward Den Danske Bank’s key values and strategic aims.

How much will you commit to the Nordic markets and how will you source deals outside the region?

We do not have an overall portfolio target for geographical distribution, as the various projects will each have their own allocation models. Although we are part of a Nordic organisation, and the bulk of our investment and fund raising opportunities will arise in that region, the general purpose of pooling private equity investments is to offer investors an opportunity to invest outside their existing areas, or segments, or both. So we will be able to see a clear trend of our investments starting in well-developed areas known to us, in particular the Nordic countries, but expanding geographically beyond that area.

Outside the Nordic countries, we will build on our existing network and include efficient intermediaries in advisory boards and similar functions. Hopefully, we will also be able to contribute to the development of those funds or companies where we have already invested, whereby our partners in those investments will be interested in working with us again.

Do you have a full team on board now?

The fund-of-funds side of the business has six investment professional which we expect to strengthen further. And eVentures currently has three on the investment team that John Helmse-Zinck will probably double in time, as its fund raising target of around $125 million gets underway. In addition we have responsibilities to a venture fund called Medicon Valley Capital which has been set up by Danish and Swedish investors. On the Danish side are our parent company and Novo, the holding company of Denmark’s largest pharmaceutical and biotech company, Novo Nordisk. Our combined contribution to the fund totals SEK 200 million. The two Swedish investors are contributing a similar amount, with the large pension fund AP Fonden adding SEK175 million and the savings bank Sparbanken Finn SEK25 million to the pot. Medicon Valley’s mission is to invest in innovative research enterprises in the Copenhagen and Malmoe areas which have a strong biotech emphasis.

Why start with a fund-of-funds?

Danske Private Equity Partners K/S (Danske PEP) is a fund-of-funds that raised DKK2.5 billion in its first closing. A second, final closing is under way. The investors are all prime Danish institutions (pension funds and life insurance companies). Danske PEP seeks to give investors broad exposure to the private equity market. The fund does not have specific targets as to investment cycles or sectors, but rather rejects certain segments and geographic areas either as bearing to high risk or presenting too little growth opportunity. The overall geographic allocation should be expected to be 60 per cent Western Europe and 40 per cent North America, with a preference for buyout over venture funds. Within venture funds, particular attention will be paid to the biotech and TIME sectors. The rationale for starting with a fund-of-funds is both practical and strategic. The practical aspect is that we had the analytic capability in place in our organisation at the outset. Strategically, a fund-of-funds gives us immediate, substantial visibility in the market. We get to do a lot of deals right away in all key markets and sectors. By tapping a fresh source of funds we also become a desirable partner for existing operators.

What will be your greatest source of deals?

Personal contacts and the bank’s network – for quality at least.