7 Nordic buyout normalizing
Nordic buyout activity fell in 2019, after an extraordinary high activity in 2018. A total of 104 transactions were completed, and €7.8 billion invested.
Despite the reduction in equity invested last year, only two years since 2008 have seen higher levels of equity invested.
The consumer sector attracted 32 investments and was the sector with the highest number of investments, although with smaller relative activity than in 2018 (37). This is the first time in Argentum’s history of tracking the Nordic market that the industrial sector did not attract the highest number of investments in the buyout segment.
Within industrials, the activity was down almost 50 percent, from 47 to 24 investments. The ICT sector also attracted 24 investments. Except for financials and insurance, no single sector sticks out in terms of an increased number of investments.
“This downward slope might be a coincidence. For our concern, 2019 felt like a very ‘normal’ year. Four out of five investments we did last year were in the consumer sector, not as a part of a specific focus, but because a lot of exciting opportunities have turned up in this sector, especially in Sweden,” Stampe of Altor says.
“A general trend is that innovative companies within sectors like software, fintech, and niche consumer products sold online have reached a size where they become interesting for private equity. We will continue to focus on traditional sectors like industry and business services, but these growing tech companies are attractive for us too,” he adds.
Large deals pull up total
Some of the larger deals completed in 2019 were THL Partners’ investment in the Norwegian robot technology company AutoStore, Partners Group’s investment in the offshore infrastructure company CapeOmega from HitecVision, and EQT’s investments in IP-Only, a Swedish provider of fiber-based data communication and datacentre services, Dellner Couplers, a Swedish provider of train connection systems, and Karo Pharma, a pharmaceuticals company.
These and some other large deals are the reason why the total amount invested in 2019 is at a relatively high level, the second-highest average deal size ever recorded in a year at €75 million, only beaten by 2018 (€90 million in average). The total number of buyout transactions in the Nordics, on the other hand, is at its lowest since 2013 with 104 transactions.
Broken into equity investment size, over half of the transactions were in the interval €10–50 million, while 19 percent were under €10 million. 19 percent of the transactions were above €100 million, and 12 percent were between €50–100 million. The most active fund managers in 2019 were Altor, EQT, Equip Capital, and Nordic Capital.
Most active fund managers in 2019
| Fund manager | HQ | # of deals | Companies |
|---|---|---|---|
| Altor Equity Partners | Sweden | 5 | Curamando, iDeal of Sweden, Nordic Tyre Group, Ving Group, XXL |
| EQT Partners | Sweden | 5 | Dellner Couplers, Ellab, IP-Only, Recover Nordic, Karo Pharma |
| Equip Capital | Norway | 5 | Bastard Burgers, Busfabriken, Holy Greens, Makeup Mekka, Rush Trampolinepark |
| Nordic Capital | Sweden | 5 | Bank Norwegian, Concia, Consilium Marine & Safety, iLOQ, Signicat |
Growth in Norwegian buyout
35 transactions in the buyout segment involved Swedish companies, constituting one-third of the total. Despite a reduction of 19 transactions in Sweden, it is still the country that attracts the most investments. This has been the case for most recent years, and every year since 2015.
Unique for 2019 was that Norwegian companies attracted the second most investments (29 transactions), which makes Norway the only country with growth in the Nordic buyout segment in 2019, with an increase of 4 investments. Next, we find 24 investments in the buyout segment in Denmark, a reduction of 38 percent from 2018. In Finland, the number of investments slumped and fell almost 50 percent, to 16 transactions in 2019.
Swedish fund managers were involved in 37 percent of transactions, followed by Norwegian and Danish one with 17 and 13 percent respectively. UK fund managers delivered 10 percent of buyout deals, a higher share than Finland with 9 percent.
Non-Nordic fund managers’ focus on Nordic companies remains high; 24 percent of buyout deals were made by fund managers outside the Nordic region, as compared to 28 percent in 2018. The share of around one-quarter of investments has been stable for the last three years.
Decent conditions for future investments
The three biggest deals in terms of invested equity were finalized in the second quarter of 2019, and as a result, 57 percent of equity was invested between April and June, whereas only 16 percent in the first quarter of the year. In the second half of the year, only €2.1 billion – or 27 percent – were invested.
Given a large amount of fundraising by buyout funds in 2018, and large amounts being in the pipeline for 2020 (see our estimates), the conditions for high investment activity in the coming years are present.
However, this capital does not need to be invested in the Nordics, and higher pricing speaks against an increased activity.