10. Buyout fundraising: A relatively strong year
In total, Nordic buyout funds raised over 12 billion euros, almost three billion more than expected at the beginning of the year. Many fund managers plan to close funds in 2022, a year that could crush all previous fundraising records if market conditions allow it to.
2021 will stand as a decent year for fundraising in the Nordic buyout segment, even though it is far from the peak years of 2018 (22.4 billion euros) and 2020 (26.5 billion euros). With over 12 billion euros raised, the level is 5 % higher than the yearly average in the last five years.
"The pattern with cyclical fundraising continues. The large fund managers typically raise large funds every other year. The level was high in 2018 and 2020, and then markedly lower in 2017, 2019 and 2021", says Joachim Høegh-Krohn, CEO at Argentum.
Many small- and mid-cap funds raised capital
Even though the total fundraising fell from 2020, the number of funds increased. In 2021, 25 fund managers closed funds, compared to 20 in 2020. In contrast to the development in recent years, small- and mid-cap funds stood for most of the fundraising, almost two-thirds (see graph above).
One of the small and midcap funds was Norvestor's Fund VIII, which closed in March with 800 million euros committed capital from a diversified group of existing and new investors from Europe, North America and Asia.
"A key part of the Norvestor strategy is to build Nordic champions, and we have continued this successfully with Fund VIII. In the portfolio companies, we seek to increase the recurring revenues, digitalise, and focus on ESG related value drivers, in addition to speeding up the Nordic growth through add-on acquisitions", says Marika af Enehjelm, Partner based out of Norvestor's Finland office.
"In the beginning of the pandemic, we experienced some hesitance among new investors towards a fully digital approach. But then our LPs went digital very fast, and the fundraising process actually got more efficient. This new way of fundraising is here to stay, I believe. We are fortunate to have a loyal investor base that knows us very well. In addition, we were able to attract new LPs through the pandemic as well", Enehjelm adds.
Two brand-new Nordic GPs have raised capital and closed large funds during the pandemic: Trill Impact, a Sweden-based "impact mid-market buyout fund", raised 900 million euros for their inaugural fund in September; and KLAR Partner's debut fund, which will "target buyout investments within the mission-critical services and asset-light industrial sectors", closed at 630 million euros in March.
Top 10 Nordic buyout funds with public closing in 2021
| Fund | Raised in close (€ million) |
|---|---|
| FSN VI | 1 800 |
| IK Small Cap III Fund | 1 200 |
| Nordic Capital Evolution | 1 200 |
| EQT IX | 1 000 |
| Adelis Fund III | 932 |
| Trill Impact | 900 |
| Triton Smaller Mid-Cap II | 815 |
| Norvestor VIII | 800 |
| KLAR Partners I | 630 |
| Impilo (Tranche II) | 590 |
Many fund closings pushed to 2022
Many fund managers postponed fundraising close in both 2020 and 2021. As a result, several fund managers in the Nordic region are planning on closing large funds in 2022.
According to Argentum's overview, over 50 billion euros is in the fundraising pipeline for 2022. If the Nordic buyout funds close their funds as expected, 2022 will be a record year for Nordic fundraising in the buyout segment.
"According to our forecasts, 2022 will be a record year even if just half of the capital in the pipeline gets raised. However, we must take the demanding financial climate at the time of printing, in April 2022, into account. The uncertainty is high and might lead fund managers to push the fund closing until we have a calmer market condition", says Joachim Høegh-Krohn, CEO at Argentum.
There is a record amount of capital in the pipeline for Nordic buyout funds in 2022.