8. Buyout deals: A peak year in the later stages
In the Nordic buyout sector, the deal activity soared in 2021. Buyout funds completed 192 investments in total, which is the best year to date. The amount invested was also record-high at 19 billion euros, equal to a 124 % increase. Industrial companies made a comeback as the most dominant sector, and we find four of them on the list over the ten largest deals during the year.
"Nordic buyout companies are growing, building synergies, and delivering results despite the pandemic and developments in the stock market in general, as the numbers from 2021 show", says Joachim Høegh-Krohn, CEO at Argentum.
Following two years of moderate activity, the Nordic buyout sector experienced its most spectacular year in 2021, both with regards to the number of deals and the invested amount.
"Companies in the industry sector made a comeback last year, and Anticimex, Speira, Torghatten, and Stark Group were among the most significant deals. Among the most active investors, we find the Norwegian fund manager Equip. There was also an all-time high number of ICT deals, which we have talked to Denmark-based GRO Capital about. Further on, UK investors were most active among the international investors in Nordic buyout companies in 2021", says Høegh-Krohn.
The markets have been rockier at the start of 2022, due to the war in Ukraine and increasing interest rates. And on top of this, the looming climate crisis.
"I believe that private equity is well equipped to invest and create added value in a world that requires adjustment to new value chains, e.g., due to the war in Ukraine, and new solutions for the green shift. We see that fewer IPOs are made in the short term, but we are still experiencing solid activity levels in the Nordic buyout market and expect this to continue", the Argentum CEO says.
Amongst the largest deals were four deals involving industrial companies
Like in the venture segment, 2021 was not a year where one or two investments claimed large parts of the total invested amount. Rather, there were many large transactions. When looking at the ten largest deals, they received around 43 % of the total invested amount. The industrial sector had several of the most significant transactions in the buyout segment in 2021. In addition, we can find several investments in other sectors that stand out in terms of size:
Industrials
- In June, EQT invested in Anticimex. The transaction valued the Swedish pest control specialist at 5.7 billion euros. The company was sold from EQT VI to its sister fund EQT Future. In practice, EQT extended its investment by divesting to a fund with a longer time horizon.
- In March, Norsk Hydro sold its rolled and recycled aluminium business to KPS Capital Partners (US), which renamed the company Speira. The transaction valued the company at around 1.4 billion euros.
- EQT Infrastructure and Nysnø Klimainvesteringer have joined the ownership side of the Norwegian transport group Torghatten. Torghatten operates ferries, express boats, buses, and air traffic throughout Norway. The transaction valued the company at around 1.1 billion euros and was closed in September.
- CVC Partners (UK) bought 100 % of the shares in STARK Group in January, a company headquartered in Denmark that is the leading distributor of heavy building materials in Northern Europe.
Health care and life sciences
- In March, Nordic Capital invested in the Danish dermatological company Leo Pharma. According to Bloomberg, the fund manager valued that company at 3.2 billion euros.
- In March, the Swedish pharmaceutical company Recipharm was acquired by EQT IX
- EQT IX also acquired a minority stake in 3Shape in December, a Danish producer of 3D scanners and other software for the dental industry.
ICT
Utilities
- In March, KKR (US) invested in the Finnish grid and electricity company Caruna. The Espoo-based company maintains, repairs, and builds a weather-resistant power grid for almost 700,000 Finnish electricity customers.
New actor among the most active investors
On the list over the most active fund managers in 2021, we find traditional buyout actors like Altor, Nordic Capital, and Norvestor. We also find fresh actors like Equip, which is a Norwegian fund manager founded in 2018 (see full list below).
"We had a very strong deal flow last year, with a lot of large investments, in total six platform investments and eleven add-ons. Our experience is that entrepreneurs want to work with us, and we have many bilateral processes rather than participating in auctions. Our goals are to keep working with the company founders following the investment", says Torkild Hebbert Haukaas, partner and co-founder of Equip.
Equip typically invests in B2C and B2B service companies. Two of the fund's investments in 2021 represent major trends in both the B2C and B2B markets. Ryde Technology is a micro-mobility platform, and one of the many actors in the e-scooter market, while Cure Media is one of Europe's leading influencer marketing agencies.
"Three megatrends that our companies get a major boost out of is digitalisation, increased use of services both by companies and consumers, and sustainability. Ryde ticks all of these boxes: It has a digital backbone, it is about micro-mobility, and it is a sustainable service", says Hebbert Haukaas.
"Cure is another example: It is platform that connects consumers, marketers, and influencers through AI. We see that influencer marketing is growing a lot. A large clothing manufacturer can find the right influencer to promote their product through the Cure platform."
Most active fund managers in 2021
| Fund manager | HQ. | # of deals | Companies |
|---|---|---|---|
| Verdane Capital | Norway | 7 | Bellman Group, Jupiter Bach, Lumene, Nordic Vehicle Conversion, Silva Sweden, Voyado, Polytech |
| Nordic Capital | Sweden | 6 | Boost AI, Sortera, Vizrt, Leo Pharma, Qred, Sambla Group |
| Altor Equity Partners | Sweden | 6 | Aarke, NOD, Multi-Wing, Totême, Palette Software, Raw Fury |
| Norvestor Equity | Norway | 6 | BST Brandskyddsteamet, Globeteam, Smartvatten, Green Group, Pinja, CIC Hospitality |
| Equip Capital | Norway | 5 | Miles, Ryde Technology, Riggtech, ØkonomiBistand, Cure Media |
| IK Investment Partners | Sweden | 5 | Advania. Mecenat, Formuesforvaltning. TrueSec. Renta Group |
| Polaris Private Equity Partners | Denmark | 5 | Contour Design, Stronger, The North Group, Sinful, G&O Maritime Group |
| CapMan Capital Management | Finland | 5 | HopLop, MM Sports, Pharmia, Marinetek, Metsapietila |
| Adelis Equity | Sweden | 5 | Nordic BioSite, Pixelz.Circura, Renevo, DLVRY |
Comeback for the industrials sector
Among the buyout deals, the industrials sector attracted by far the most investments, 72 in total, making up 38 % of all transactions. The growth is 78 % compared to the average number of industrial deals in the last five years. Much of the accumulated growth from 2020 to 2021 can be attributed to the industrial sector.
Norvestor was among the most active investors in the Nordic buyout segment in 2021, with two large industrial deals during the year, BST and Globeteam.
"I am not surprised that the industrial sector had a comeback last year, following a downturn in 2020. Physical meetings and factory visits are usually more essential when evaluating industrial companies. However, for Norvestor's part, we have been lucky to have feet on the ground in all the Nordic countries throughout the pandemic. Hence, we could send colleagues to facilities if needed. The way we work, we treat the Nordics as one home market", says Marika af Enehjelm, Partner at Norvestor's Finland office.
"The fire protection company BST is a typical Norvestor story. BST has a strong presence in Sweden, and it will now enter the other Nordic markets through add-on acquisitions, and then grow organically. We are lucky that the cultural hurdles are so few when expanding a company from one Nordic country to the rest of the region, and Norvestor can support these companies with our own colleagues in Oslo, Stockholm, Helsinki, and Copenhagen, understanding the local cultural nuances", Enehjelm says, who is also a part of BST's board.
All-time high number of ICT deals
The second largest sector was ICT, with a 23 % share of all buyout deals. Investments in the sector grew by almost 10 % from an already high level in 2020, reaching an all-time high of 45 deals. One of the investors in the sector is Copenhagen-based GRO Capital, which held a final close on 600 million euros for its third fund in March 2022.
"We invest in B2B software rather than B2C because it is easier to understand the value proposition and what the product can do for its clients. The businesses that typically buy these services have a small IT department and understand what value it adds to them. If you look at e-commerce, it is more demanding, where you typically need to build up a brand over some years before you can reap the rewards", says Lars Dybkjær, CEO of GRO Capital.
"The companies in our portfolio enter long subscription deals with their clients. When we invest, the technology is typically proven, and we can focus on the commercial risk. We prefer to not take technological risks. Our sweet spot is matured B2B software companies with revenues between 28 and 50 million euros", he adds.
In 2021, the company made three deals in the Nordics: Secomea, Luxion, and Promon, the GP's first Norwegian investment.
"We are very excited for these companies and hope to expand their global presence. Promon is already in use globally, and we will further professionalise the company, and invest in a good marketing setup. The same goes for Luxion, a company that has large clients like Nike, Adidas, and Google, which shows that their product is working. Our role is to develop the marketing organisation", Dybkjær says.
Health care and life sciences deals punching above their weight
In addition to the growth in industrials and ICT deals, the consumer, health care and life sciences sector faced considerable growth. There were 42 deals in Nordic consumer companies, third most, and an increase of 42 % compared to the average.
The fourth largest sector, health care and life sciences, recovered from a temporary slump in 2020, and attracted 16 deals; an increase of 129 % from 2020, and up 45 % compared to the average. As mentioned, an impressive three out of the ten largest deals were in the sector: Leo Pharma (pharmaceuticals), Recipharm (pharmaceuticals) and 3Shape (health care technology)
Buyout deals increasing across the Nordics
In 2021 the number of deals more than doubled in both Denmark, Finland, and Norway. Sweden also experienced growth in the number of deals.
- Denmark: Danish companies attracted 28 % of buyout deals in the Nordics in 2021, an increase from their average Nordic market share of 26 % in the previous five years. The amount invested in Denmark increases by nearly 150 % from 2020 and is also 50 % higher than the average share from 2016 to 2020.
- Finland: Finnish companies attracted 45 % more investments in 2021 than the average amount between 2016-2020. 18 % of the Nordic buyout investments were made in Finnish companies in 2021, making up 11 % of the amount invested in the Nordic market.
- Norway: Norway attracted 22 % of the buyout deals in the Nordic market in 2021, but 29 % of the total amount invested. Buyout deals in Norwegian companies more than doubled from 2020 and was also nearly 59 % higher than the average number of investments in Norway between 2016-2020.
- Sweden: Swedish companies still attracted the most investments of the four countries, claiming 32 % of all buyout deals. The number of investments were 36 % higher than their average from the five previous years. 40 % of the invested amount in the buyout segment was invested in Swedish companies, significantly more than in the three other Nordic countries.
UK investors most active among international investors
The appetite for Nordic buyout companies among fund managers seems to be growing further, as the number of transactions from fund managers in the UK as well as the rest of the world grew. The UK overtook the US as the most active investor country among the non-Nordic fund managers.
Further on, the number of investments by non-Nordic fund managers have never been higher. 50 investments from non-Nordic fund managers amounted to 26 % of buyout transactions, falling from a 33 % share in 2020, despite increasing the number of transactions by 56 % compared to the average in the years 2016-20.
Swedish fund managers made 68 % more buyout deals in 2021 than in 2020, but still were involved in a lower share of deals than in the previous year, falling from 33 % of deals in 2020, to 30 % in 2021. This is mainly because Norwegian and Finnish fund managers increased the number of transactions by 192 % and 140 % respectively.