EQT Nordic and Denmark Strike Chord

EQT Partners in September announced the final closings of both EQT Scandinavia II and EQT Danmark. EQT Scandinavia II, the follow-on fund to Scandinavian Equity Partners, closed on approximately SKr 5.7 billion (ecu 600 million), slightly more than its original upper target of SKr 5 billion. EQT Danmark, a dedicated vehicle for middle-market Danish investments, met its DKr 1 billion (ecu 135 million) target.

EQT Scandinavia II is around double the size of its 1995-vintage predecessor. When the new fund was launched this Spring, EQT Partners predicted that the vehicle would enjoy a high level of repeat interest from existing investors.

This expectation was well founded: around 65% of the fund was raised from participants in Scandinavian Equity Partners. In addition to sponsors Investor AB and AEA Investors Inc., who together contributed SKr 1.5 billion of the total, repeat investors included Sirius, Skandia, Storebrand, the fourth and sixth national Pension Funds of Sweden, and the LRF Swedish Farmers’ Co-operative. The third sponsor of the original EQT fund, SE-Banken, has subsequently revised its investment strategy and did not participate directly in EQT Scandinavia II, but Trygg Hansa, now part of the SE-Banken group, is an investor in the latest fund. New investors included SPP, Tampo Group, Gjensidige Insurance and Trygg Baltica.

Bengt Hellstrm, a partner of EQT, said the group was “somewhat surprised” that EQT Scandinavia II reached the level it did without recourse to an extensive international marketing programme. Apart from the contribution of US sponsor AEA, only about 5% of EQT Scandinavia II was drawn from investors outside Scandinavia.

Lars Ramqvist, chairman of Ericsson, heads EQT Scandinavia II’s board, and the fund is supported by a panel of senior advisors composed of prominent Scandinavian professionals from industry, commerce and finance.

EQT Scandinavia II will target Nordic buyouts with a transaction value of SKr 500 million or more. Bengt Hellstrm reported that EQT Partners’ deal flow is currently stronger than ever, despite recent turmoil in the public markets worldwide. EQT Scandinavia II’s first deal, the FMk 1 billion acquisition of Finnish group Cultor’s Vassan Baking subsidiary, completed in early October (story, page 23); the investment was shared between Scandinavian Equity Partners and EQT Scandinavia II, taking the first fund to full investment.

While EQT Danmark shares the same investment philosophy as the larger regional fund – majority ownership, active management and adding value via the expertise of the industrialists and financiers who act as adviser to EQT Partners – it will focus on smaller Danish companies, undertaking transactions ranging in value between DKr 150 million and DKr 400 million.

Erik Hansen of EQT Partners AS, the Copenhagen-based subsidiary formed to act as advisor to the Danish fund, said EQT Partners perceives tremendous opportunities in the Danish mid-market sector, which, like Germany’s Mittelstand, has a concentration of family-owned businesses with an imminent need to resolve succession issues. Because deals in EQT Danmark’s target range fall below the radar screen of pan-European funds operating out of London, EQT Danmark’s only real competitors are a handful of domestic funds. Regarding the timing of the fund, Erik Hansen said EQT Danmark is “currently in no hurry to invest”, beacues the managers expect the price correction in the public markets to filter through to the private company sector in the coming months.

Investor and AEA are also sponsors for the Danish Fund, together with Nykredit, one of Denmark’s leading institutions. The balance of the fund was raised from a number of Danish corporate and institutional investors, including Trygg Baltica, BT Bank, Augustinus Fabrikker (the major shareholder in Scandinavian Tobacco), the Otto Mnsted foundation and the finance sector pension fund. Some 15 individuals, who are either company owners or CEOs of major Danish corporations, have also invested in the fund. Harry Faulkner, the former CEO of Alfa-Laval, chairs EQT Danmark’s investment committee.