8. Buyout fundraising: Small-cap increased while large-cap declined
In total, buyout funds secured €7.2 billion, with a total of 14 fund successfully closing in 2023.. In general, large fund managers saw a greater decrease in their fundraising efforts compared to small-cap funds. Moreover, fund managers' expectations suggest that fundraising in the buyout segment in 2024 will more than double that of 2023.
In 2023, a total of 15 funds successfully closed, raising €7.2 billion. The amount raised represents a significant decrease from 2022, a year that saw Nordic buyout funds achieve a record-high in fundraising. 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, 2021 and 2023. In particular, this is related to when EQT and Nordic Capital are raising capital.
Based on Argentum's overview from last year, fund managers had anticipated raising over €20 billion. As highlighted in the final section of the chapter, fund managers now anticipate that a portion of this amount will be raised in 2024 instead.
Large-cap funds less dominating: Large-cap funds accounted for 57 percent of capital raised. This is a small portion compared to 2022, when they accounted for over 90 percent.
Increase in fundraising by small-cap funds
The record-high fundraising achieved in 2022 was primarily driven by the closings of three large-cap funds. In contrast, 2023 saw a 85 percent reduction in fundraising by large-cap funds, while small-cap funds experienced a 45 percent increase in their fundraising. Consequently, the substantial drop in the total funds raised within the buyout segment can be largely attributed to fewer closings by large-cap funds.
Top 10 Nordic buyout funds with public closing in 2023
| Fund | Raised in close (€ million) |
|---|---|
| EQT X | 2,600 |
| Norvestor IX | 1,500 |
| Fidelio III | 1,000 |
| Procuritas VII | 407 |
| IK Partnership II | 336 |
| Equip II | 300 |
| Via Equity V | 200 |
| Catacap III | 200 |
| Longship Fund III | 200 |
| Capidea Capital IV | 168 |
One of the small- and mid-cap funds that was raised during 2022 and 2023 was Equip’s Fund II.
Equip's Founding Partner, Torkild Hebbert Haukaas, describes the challenge of securing funding in tough market situations:
“Increased interest rates and macroeconomic uncertainties have halted both M&A and IPOs, reducing distributions to limited partners and therefore their ability to commit to new funds. This made 2023 a challenging year for global fundraising. As we have seen in prior downturns this increases the focus on GP quality, track record and proven investments strategies”.
In 2023, Equip successfully closed an oversubscribed Fund II at NOK 3 billion hard cap, which is 60 percent larger than Equip’s Fund I.
“For Equip, the team’s strong track record and especially the strong performance of our Fund I, was key in being able to successfully raise Fund II and close at the hard cap”.
Norvestor is one of the more experienced players in the Nordics, having been in the industry for over 3 decades, the private equity firm has been through several cycles previously. Their general strategy of investing in resilient businesses across the Nordics has stayed the same. In November 2023 they announced the closing of their fund, Norvestor IX, at hardcap EUR 1.5 billion.
Rebecca Farr, head of investor relations and fundraising at Norvestor points out the importance of relationships and having a stable investor base:
“What stands out, apart from having a strong track record, is having a loyal and long-term investor base. With less capital available in the market, investors are more selective when it comes to which funds they allocate money to. It is important to maintain good relationships with your investors, also between fundraises, she says.
“A general impression of the Nordics is that the players here are transparent. This, in addition to being a stable part of the world, is attractive to investors, and historically speaking, the Nordic region has done well in uncertain times”, she continues.
That being said, Farr points out that due diligence processes were more time consuming during Norvestors latest fundraise:
“Investors were even more focused on ESG strategy than in previous raises”.
Higher expectations for 2024
As mentioned above, less capital than expected was raised in 2023. One reason is that fund managers chose to postpone closings, resulting in several fund managers in the Nordic region planning to close large funds in 2024.
According to Argentum’s overview, there is €18.9 billion in the fundraising pipeline for 2024. If the Nordic buyout funds close their funds as expected, 2024 will be a good year for Nordic fundraising in the buyout segment.
Fundraising expected to increase: Nordic buyout funds expect to increase fundraising in 2024.