12. Buyout fundraising: Three large-cap funds lead the way
Fundraising in the buyout segment reached new heights during the pandemic. Three large-cap funds closed, all Sweden-based, accounted for >90 per cent of total fundraising. Also, several small- and mid-cap funds closed during the year.
“The list of buyout funds that closed during 2020 are dominated by renowned fund managers. This indicates that they had an easier time raising capital during the pandemic, which is not surprising. There was a flight to quality among LPs, who committed capital to players they knew rather than betting on new ones,” says Joachim Høegh-Krohn, CEO at Argentum.
EQT IX raised €14.6 billion last year, making up 56 per cent of the overall amount raised during the year. To put it in perspective, the capital raised by EQT IX amounts to 15 per cent of fundraising in the buyout segment over the period 2010-2020. The fund will follow the investment strategy of preceding EQT funds, investing broadly across geographic markets and industries.
Further on, Nordic Capital X (€6.1 bn) and IK IX Fund (€2.9 bn) were more significant than any funds closed in 2019. In total, the three beforementioned funds accounted for over 90 per cent of total fundraising in 2020.
Record-breaking: Since 2011, only two years have surpassed €20 bn in fundraising in the Nordic buyout segment: 2018 and 2020.
Fifteen small- and mid-cap funds
Among small- and mid-cap funds, noteworthy closings include Axcel VI (DEN), Equip (NOR), Sponsor V (FIN), and IK Partnership Fund (SWE). See the top 10 list below.
Henrik Lisæth, the Managing Partner at Norway-based Explore Equity, says that the pandemic did not create difficulties in raising capital. Especially if you already had a broad network of LPs.
“Many funds have the benefit of having met investors physically before, including international investors. Hence, one can do efficient digital meetings, which is also much more effective. Raising capital during the pandemic should therefore not be a hindrance,” Lisæth says.
“Many investors are looking for new pockets of return. This can potentially be positive for different sector-focused fund managers in the Nordics. I believe investors would be willing to look into them, although it could prove challenging to attract capital digitally without prior contact,” he adds.
Top 10 Nordic buyout funds with public closing in 2020
| Fund | Fund size (%(€ million) |
|---|---|
| EQT IX (Sweden) | 14600 |
| Nordic Capital X (Sweden) | 6100 |
| IK IX Fund (Sweden) | 2850 |
| Axcel VI (Denmark) | 630 |
| IK Partnership Fund (Sweden) | 265 |
| Priveq VI (Sweden) | 238 |
| Sponsor V (Finland) | 202 |
| Equip I (Norway) | 180 |
| Longship II (Norway) | 170 |
| Verso Fund III (Finland) | 100 |
Many fund closings pushed to 2021
Almost 30 Nordic buyout funds expect to close next year. The combined estimated target for these funds is €9.5 bn, indicating that investors expect to maintain their activity level. Verdane Edda II is one of the funds in our pipeline, which closed already in January 2021. Frida Einarson, Partner responsible for IR & Business Development at Verdane, says that the fundraising process was “surprisingly normal” last year. She believes it was a strength to know LPs in advance of the pandemic.
“The difference last year was that 99 per cent of meetings were done virtually instead of in person. It is harder to hit it off chemistry-wise digitally, making it a strength to know the other person already. Introductory meetings are tougher to do online,” Einarson says and adds:
“On a personal note, I believe it is more climate-smart to travel less, and I both hope and believe that more due diligence meetings will be moved to digital channels in the future, at least if you already know the investor you are meeting. I also hope that we all will use physical meetings in a smarter way, as a way of getting to know the institution and the person we are meeting. We can use digital meetings more to share information and for mutual updates.”