9. Buyout fundraising hits an all-time high
In total, Nordic buyout funds raised over €28.9 billion, which is more than double the amount raised in 2021, and €2.4 billion more than the previous record in 2020. Two large-cap funds from EQT and Nordic Capital make up the bulk of capital raised. Fewer funds had closings in 2022, compared to in 2021. However, a record-high number of 27 buyout funds plan to close funds in 2023.
In 2022, a record-high amount of funds was raised by Nordic buyout funds. In total, €28.9 billion was raised by a total of 14 funds with closings. Compared to 2021, the amount of funds raised has increased by 139 %, although the number of funds with closings fell from 25 in 2021 to 14 in 2022. Compared to the previous record in 2020, when €26.5 billion was raised, fundraising in 2022 was 9 % higher. The amount raised in 2022 was more than twice the average raised during the previous five years.
The pattern of cyclical fundraising continues. The large fund managers typically raise large funds every other year. The level was high in 2018, 2020 and 2022, but was markedly lower in 2017, 2019 and 2021. In particular, this is related to EQT and Nordic Capital.
Large-cap funds dominating: Large-cap funds accounted for 92 % of capital raised compared to 2021, when several small- and mid-cap funds raised a majority of the amount, at almost two-thirds.
Large-cap funds dominating
The record-high amount of funds raised in 2022 can largely be attributed to three large-cap funds with closings. EQT X, Nordic Capital XI and Summa Equity III raised a combined €26.7 billion, which amounts to 92 % of the capital raised in the buyout segment. By comparison, three large-cap funds also held closings in 2021 and 2020, but in 2021 these large-cap funds raised a combined €4.2 billion.
Top 10 Nordic buyout funds with public closing in 2022
| Fund | Raised in close (€ million) |
|---|---|
| EQT X | 15,400 |
| Nordic Capital XI | 9,000 |
| Summa III | 2,300 |
| HitecVision - New Energy Fund | 875 |
Verdane Idun | 300 |
| Valedo IV | 220 |
| Polaris V | 210 |
| Standout II | 182 |
| Erhvervsinvest V | 136 |
| Driv Kapital Fund I | 85 |
Fewer funds raised capital in 2022 compared to in 2021, although the amount has raised never been higher. Small- and mid-cap funds accounted for 8 % of capital raised in 2022, which compares to almost two-thirds in 2021.
One of the small- and mid-cap funds that was raised during 2022 was Equip’s Fund II.
Torkild Hebbert Haukaas, Founding Partner of Equip, explains the challenges of raising funds during uncertain times:
“The market for raising capital is tougher. If you don’t have a good offer, something that stands out, then it’s tough – at least, more challenging than it was. But for good funds, with good results and strong teams, there is still an opportunity to raise money”, Haukaas says.
When asked about their own experience of raising capital for their second fund during these times, he adds:
“For us it has been a positive experience, but we are in a growth phase, and we have a strong Fund I. We are very grateful for the support we received from the Fund I investors. We had a more than 100 % reup rate and at the same time saw good interest from new investors, so we have over-delivered on the goals we set for our fundraising, and in a challenging climate, we are satisfied with that.”
Rebecca Farr from Norvestor points out the importance of relationships and having a stable investor base in fundraising, and particulary so in uncertain times:
“The relationship part is becoming more and more important, and having a stable investor base who you can count on for reups is something that can turn a fundraise into a success. ESG is also becoming more and more important, and we see that this is top of mind for most investors through the whole fund cycle”, she says.
“Another trend we see is that investors are more selective in which funds they allocate money to. As there are so many funds in the market, we hear that many of the investors must opt out of certain funds, and rather choose to bet larger tickets in individual funds than smaller tickets in several funds. This is a disadvantage for those who are not chosen, but a great advantage for the funds that are. This means that if you are performing well and getting money, you will be likely to get more”, she adds.
Many fund closings pushed to 2022
Many fund managers postponed fundraising in both 2020 and 2021. As a result, several fund managers in the Nordic region were planning to close large funds in 2022. Due to the uncertainty in the market, and, as some GPs mention, because the process takes longer than before, we also see that the closing of funds is being pushed back even further in time, and many are planning on closing funds in 2023.
“It was said that 2022 would be the busiest fundraising market for a long time, and it looks like 2023 is just as crowded. It seems that many managers have shifted their plans slightly. Some are coming to market earlier than planned, and others are taking longer to raise money, which seems like a general trend across the market. There is more competition to get the attention from LPs, and the LPs also seem to be taking longer to complete their DD processes than before and have even more detailed questionnaires that need to be responded to”, says Rebecca Farr, from Norvestor.
According to Argentum’s overview, there is €20 billion in the fundraising pipeline for 2023. If the Nordic buyout funds close their funds as expected, 2023 will be a good year for Nordic fundraising in the buyout segment, despite being considerably lower than in 2022.
Fundraising activity is expected to remain strong in 2023, as several quality GPs are in the market, although the current market environment could make LPs more hesitant and slow down the pace of fundraising.
A record amount: A record amount of capital was raised by Nordic buyout funds in 2022, and the pipeline for 2023 looks strong.