9. Backed by PE: iteam
Since 2020, the Norway-based buyout fund Equip Capital has bought multiple IT service companies along the Norwegian coast. In 2022, the GP merged them and created a new national IT actor, iteam. "It is a great buy-and-build case that shows private equity at its best", says Equip partner Torkild Hebbert Haukaas.
Haukaas was responsible for the investment that Equip made in Funn in January 2020, a small IT company in strong growth based in Narvik, Northern Norway. It became the first of eleven similar investments during the pandemic.
"We saw that there were multiple local IT service providers along the Norwegian coast that could be consolidated into a national actor. iteam will be better able to serve customers nationally, develop a technological edge and provide attractive opportunities for employees", Haukaas says.
The new company is one of Norway's fastest-growing IT companies, with 31 departments from Kristiansand in the sound to Svalbard in the far north.
Personal relationships as edge
"As local IT service providers, our most important asset is the years of personal relationships with our customers. Compared to global actors, we truly know the clients and their needs, and they trust us in keeping them up to speed on digitalisation", says Lars Ivar Simonsen, CEO of iteam.
Simonsen had spent his whole working life at Funn, a regional IT research centre during the internet's infancy in the 1990s, which eventually became a company. Funn created Doffin, Norway's first database for public procurement; it ran some of the country's first data centres; it was crucial for REC's solar energy efforts, and it was responsible for operations at Hurtigruten – Norway's coastal express – for many years.
Funn had many professional owners before Equip made its investment.
"Private equity was new to me, but it boils down to people in that business as well. Torkel and the Equip team are engrossed in developing companies, and as a business owner, I have never felt safer. They are a partner in good and bad times, and they bring the whole toolbox of capital, knowledge, and network", Simonsen says.
Buy-and-build during the pandemic
Equip had made the grunt work to create a national actor before the Funn investment. Simonsen and Equip then browsed each region of Norway through the pandemic to find companies that performed well and shared their growth philosophy.
"Before the merger, we were many small actors that had to punch above our weight to offer good products. Our presence is still local, but now we can produce services on a national scale and develop expertise in fields like cyber security", Simonsen says.
"Many of the companies face a generational shift from now on, and we want to open for new generations by offering key positions in the system. Hence, iteam will be organised in regional hubs", he adds.
In addition to benefitting from economies of scale, the service and digitalisation trends at the heart of iteam's market offering have intensified during the pandemic. The IT services sector has recurring revenues, strong cash flows, and solid margins.
"All these factors make it attractive for a PE fund like us to play a role in the development", Equip's Haukaas says.
Competition for the best brains
According to Simonsen, iteam will have a flexible view of where employees work, which is key to attracting the best IT heads.
"As we did at Funn, iteam will work with local educational institutions to attract and develop talents. Now that we have a national presence, our employees can move the workplace internally or work remotely. This is the future of work and the way to keep people on longer", the iteam CEO says.
The iteam group will continue to buy companies when the fit is natural, but both Simonsen and the Equip team are preoccupied with developing the services for clients to grow organically.
"I truly believe that iteam is a new star on the Norwegian IT skyline", Haukaas says.