Great second quarter for the Nordic region

In the latest quarter there was a boom in amount invested by private equity funds into the Nordic region. In 2010, private equity funds invested EUR 6.8 billion in Nordic companies. In 2011, on the other hand, private equity funds have invested close to EUR 6.6 billion in the first six months alone. Hence, the market s well positioned to surpass the record year of 2007, when over EUR 8 billion was invested in the region.

The number of investments undertaken by private equity funds in the Nordic region also rose in the second quarter. In total, private equity funds made 72 investments, which is an improvement from the previous quarter. The overall number of investments increased by 17, or 31 percent.

Buyout segment attract the big bucks

Investment values in the buyout segment are booming. Over the last nine months, the amount invested in the region has risen steadily. In Q2, Argentum estimates that buyout funds invested a further EUR 3.7 billion in mature Nordic companies, which is over 40 percent more than in the previous quarter.

During the first six months of 2011, buyout funds have thus invested EUR 6.36 billion in the region, which is almost the equivalent to the total amount invested in the segment in 2010, which stood at EUR 6.4 billion.

After a dip in the number of buyout investments in the first quarter, investments volumes increased considerably in the second quarter. Investments rose from 19 to 26, which makes Q2 2011 the region’s best quarter since Q2 2010.

The majority of investments were made in the Swedish market, with Swedish investments accounting for 67 percent of Nordic buyout investments in Q2. Norwegian investments came second, accounting for 15 percent.

Sweden could also report the largest Nordic deal in the second quarter. US funds Bain Capital and Hellman & Friedman’s reported SEK 21 billion acquisition of Securitas Direct was also the second largest global deal and the largest European deal in Q2.

Other notable investments include Argentum-backed Altor’s investment in agricultural manufacturing company Ålö for SEK 2.2 billion. In Denmark, Argentum-backed FSN reportedly paid DKK 1 billion for their stake in HusCompagniet, Denmark’s leading producer of single-family homes.

Venture and seed funds remain hesitant

Venture capital and seed funds, much unlike buyout funds, invested less this quarter. Argentum estimates that almost EUR 90 million in first time investments reached early-stage Nordic companies in Q2. This means the total amount invested fell by 22 percent compared to the previous quarter, and is down around a third compared to the first half of 2010.

It should, however, be noted the market still shows signs of improvement compared to the end of last year. Venture and seed funds invested around EUR 80 million during the last half of 2010, whilst during the first six months of 2011, they had invested over EUR 200 million.

Like the buyout segment, venture and seed funds also made more investments in the second quarter. The total number of investments rose from 36 to 46. However, compared to the first half of 2010, we find venture and seed funds actually have made over 15 percent fewer investments.

Notable investments this quarter included Industrifonden and Sustainable Technologies Funds’ SEK 100 million investment in Swedish cleantech company Triventus and US fund Notion Capital´s USD 7 million investment in Danish ICT company Tradeshift, winner of Best Enterprise 2010 at The TechCrunch Europe startup awards.

As with Nordic buyout investments, the majority of venture investments occurred in Sweden during 2011. The Swedish market accounted for 66 percent of venture investments, followed then by Finland with 16 percent and Norway with 12 percent.

The exit market lives up to Argentum’s expectation

Private equity funds put much effort into their exit strategies in 2011, which became evident with the exit market outperforming itself for the third quarter in a row. The number of exit transactions rose from 25 in Q1 to 31 in Q2. In total, 27 Nordic companies were sold to new owners.

After a post-crisis record amount of exits in Q2 2010, which was followed by a dramatic dip in activity, the exit market has shown steady recovery. With 31 exits this quarter the markets is indeed looking better.

Buyout exits double

Buyout funds saw a huge rise in exit activity with the volume of exits in the segment almost doubling compared to the previous quarter.

The most prominent deal this quarter was Nordic Capital sale of pharmaceutical company Nycomed to Japanese pharmaceutical company Takeda. With a reported value of EUR 9.6 billion, the deal is one of the largest international exits in 2011.

Other notable deals include Argentum-backed Norvestor´s sale of Norwegian fitness chain Elixia to Swedish private equity fund Altor Equity Partners for a reported NOK 2.2 billion, and CapMan’s EUR 110 million trade sale of Swedish health care company Proxima to health care provider Aleris.

Venture funds, on the other hand, saw exit volumes drop by 20 percent. Notable venture exits this quarter included the USD 17 million sale of Swedish technology company Transic; by a consortium of Swedish venture funds. Norwegian cleantech company Hydra Tidal Energy Technology was sold to Dyranut, a major Norwegian industrial owner.

Rise of the secondary deals

Never before have secondary transactions matched the number of trade sales in the Nordic region. A total of 35 percent of all companies sold by private equity funds were acquired in secondary transaction. Trade sales, historically the exit route of choice, thus lost its top spot amongst exit routes.  The rise in secondary transactions has been a growing trend since the financial crisis.

There were also write-offs this quarter. In total, four companies disappeared out of private equity funds` portfolio. Write-offs were present in both segments.

First IPOs of 2011

The year´s first IPOs were conducted in the second quarter. Both IPOs were Swedish. Nordic Capital-backed FinnvedenBulten, an auto components producer, and Amadeus-backed Transmode, a provider of networking solutions for fixed and mobile network operators, both listed on the OMX NASDAQ Stockholm in May. Transmode’s IPO was the first technology IPO in Stockholm since 2007.

In total the companies listed for EUR 242 million (SEK 2.43 billion).  

IPO activity, however, is still slow relative to expectations at the start of the year, as the stock markets have been turbulent amidst both European and American debt crises. Analysts are predicting that the IPO exit route will remain problematic at least until the fourth quarter.

Fundraising back on track after a quiet first quarter

After a quiet first quarter fundraising was back in full force in Q2. Five funds held final closes and a further two held first closes. In total of EUR 1.17 billion was raised this quarter, and EUR 60 million was committed in the two first closes.

In the buyout segment four funds raised a total of approximately EUR 670 million. Finnish Intera Equity Partners raised their second fund at EUR 200 million, Swedish Priveq Investment raised their fourth fund at EUR 200 million, and Swedish Valedo also raised a EUR 200 million fund, their second so far. In addition, Norwegian secondary investor Cubera raised their sixth fund at just below EUR 70 million.

In the venture segment Norwegian Energy Ventures closed their fourth fund, at USD 350 million (EUR 250 million). Argentum contributed a sustantial share.

In addition, there were two first closes in the venture segment. Finnish Korona Invest held a EUR 20 million first close of their health fund, Palvelurahasto I, and fellow Finnish fund manager OpenOcean Capital held the first close of their third ICT-focused fund at EUR 40 million.