Nordic MBO Overview

Denmark, Finland, Norway and Sweden make up the Nordic region, which has a strong and growing profile as centre of seed and early stage investing in technology, particularly wireless applications and biotechnology. This reputation was enhanced during 2000 by the establishment of a number of high profile corporate venture funds in the region, some on balance sheet and others ring-fenced such as Ericsson Venture Partners, which raised $300 million equally from Ericsson, Merill Lynch and Swedish investors AB Industrivraden and Investor AB.

Such is the attraction of the early stage investing, and the experience of the venture capitalists in this region, that acquisitions of venture capital firms by venture capital firms was the result. 3i group being the most notable following its acquisitions of Finland’s SFK Finance in May last year and the bulk of Swedish Atle’s portfolio and personnel, (the rest going to 3i’s joint bidder the Swedish listed investor Ratos.) Also in February this year Danish/US 2M Invest bought Menire Advisors, which manages and advises the Menire Corporation’s fund, which, at the time of sale, had a portfolio of 15 companies.

Figures released by the European Venture Capital Association (EVCA) suggest that the region’s love affair with high tech early stage investment has been dampened and that more money is now available for expansion and buyout opportunities. And in April Capman Capital management agreed to buy Nordic Private Equity, which manages two funds worth e35.5 million.

EVCA research indicates that of the DKr6.353 billion fund raised in Denmark in 2000 up from DKr1.26 billion raised in 1999, (some 99.1 per cent came from domestic investors), it is expected that 73.3 per cent will be allocated to seed, start-up and expansion investment and of this 54.4 per cent is earmarked for the high tech sector.

In Finland e569.6 million was raised in 2000 (down from e628.3 million in 1999.) Of this 82.9 per cent of funds were raised from investors within Finland, down from 93.3 per cent in 1999. The proportion of funds raised are thought to be headed towards early stage high tech investments – some 58 per cent.

In 2000 Norway raised NKr4 billion of funds for investment (up from NKr1.2 billion in 1999.) Of this total 81 per cent came from realised capital gains. All funds came from domestic investors and 61.5 per cent will be invested in the high tech sector, 29 per cent will be invested in the non-high tech sector and the remaining 9.5 per cent will be split between buyouts and other investment categories.

In 2000 Sweden raised SEK30.641 billion of funds of which 34.9 per cent came from domestic sources. The allocation of these funds to buyout opportunities is 74.7 per cent, up from 19.3 per cent of those funds raised in 1999. Venture capital is expected to see just 25 per cent of funds raised in 2000, this is a fall from 80.5 per cent in 1999.

Sweden’s figures have been boosted by the e2 billion fund raising by EQT Partners, which recently had its final closing. This is EQT Partners fifth fund and was a significant increase on its last fund raising in 1998 at e623.5 million. The latest fund will be invested in 10 to 12 buyouts in Northern Europe and Scandinavia. Outside Sweden EQT Partners has an office in Munich, which will target opportunities in the German speaking markets.

Also resident in the region is CVC Capital Partners which has this month announced the final closing on its latest LBO fund. At some e4.65 billion it is the largest fund raising in Europe to date. CVC Capital Partners has a number of offices across Europe and in the Nordic region it is resident in both Denmark and Sweden. And on the fund-of-funds side Danske Private Equity closed a e555 million fund in the autumn of last year.

The Nordic region has a long an established buyout tradition but given the size of the domestic economies and the resultant need to trade cross border in order to gain any critical mass the region is characterised by a number of large multinationals and actual buyout opportunities year on year remain consistent, if somewhat limited.

Notable deals emanating from the region in 2000 include the October announced $1.01 billion acquisition of the Stockholm-listed group, Perstorp by Industri Kapital. The offer was subsequently withdraw and has been reinstated (see table below) upon the condition that the group sells its Pergo AB unit.

Nordic Capital (48 per cent), Polaris Private Equity (32 per cent), Intermediate Capital Group (17 per cent) and Erhervsinvest Nord (three per cent) backed the management buyout of Kirk Acoustics, the Danish manufacturer of acoustic solutions for mobile phones for an undisclosed amount.

SFK Finance and CapMan backed the e38.3 million management buyout of Upofloor Oy, the flooring unit of Finland’s Uponor Oy.

Bridgepoint Capital backed the $23.3 million buyout of Swedish Auralight from US-based Duralite International in May last year.

In June Industri Kapital acquired a 51 per cent in Alfa Lavel from Sweden’s Tetra Laval.

At the end of the year 3i announced that it had backed the management buyout of Hackmann TTT, a manufacturer of blades and machinery parts from Finnish Hackman AB’s Swedish subsidiary.