Hard on the heels of the GBP261 million (ecu 393 million) closing of the HEV III fund-raising exercise (EVCJ October/November 1997, page 8), HEV is launching its first mezzanine fund, which will focus on the Nordic region.
HEV, formerly Hambro European Ventures, aims to raise ecu 100 million for the Nordic Mezzanine Fund, with the support of its partners in the region, Nordic Private Equity in Denmark and AB Segulah in Sweden. To manage the fund, HEV has formed an HEV Nordic management team, to be headed by Vesa Suurmunne, who recently joined HEV from Hambros Bank in Finland. He is supported by Pekka Hietaniemi and Pekka Sunila, both former directors of MB Corporate Finance, Postipanki’s private equity and mezzanine division.
Vesa Suurmunne and Pekka Hietaniemi will operate out of Helsinki, while Pekka Sunila will be based in London.
Mezzanine Demand Will Grow
This is HEV’s first foray into the mezzanine market, prompted by the belief, shared by its Nordic partners, that the substantial levels of private equity capital raised for investment in the Nordic region during 1997 should further stimulate buyout activity, thus increasing demand for mezzanine finance.
Nevertheless, the Nordic Mezzanine Fund will not confine its activities to buyout fundings, but will also target later-stage expansion capital opportunities.
Pekka Sunila said that awareness of the applications of mezzanine as an expansion funding and restructuring instrument is growing in Scandinavia. This opinion is shared by, among others, SE-Banken, which last autumn announced a SKr 1 billion (ecu 113 million) allocation for mezzanine lending in the Nordic markets and on a broader pan-European basis.
With the exception of CapMan’s mezzanine fund in Finland, there is little direct competition for the Nordic Mezzanine Fund at present in terms of independent regional vehicles operating in the mid-market niche.
However, international funds including Intermediate Capital Group and Kleinwort Benson European Mezzanine have historically been active in larger deals in the Nordic markets; and a number of banks providing senior debt for private equity transactions in the region have previously demonstrated a willingness to provide mezzanine.
As an independent player with a local presence, HEV Nordic is well positioned to maintain close links with all the important private equity providers investing in Scandinavia. Pekka Sunila expressed confidence that the growing market in the Nordic region would generate attractive investment opportunities: “In terms of maturity, the Nordic markets are behind the UK. Looking at the statistics, we believe there is still room for considerable growth”.
Fund raising for Nordic Mezzanine began in January. Pekka Sunila said HEV expects “a good proportion” of the LP fund will be raised from Finnish and other Scandinavian institutions. However, he did not rule out fund raising in other markets.
HEV hopes to hold a first closing for Nordic Mezzanine Fund during the first quarter.