The private equity opportunity

The private equity opportunity

CapMan’s private equity strategies combine extensive industrial experience, strong analytical skills and sound business judgement to identify and develop the most attractive investment opportunities in the Nordic region.

We are long-term, operational, and hands-on with a strong ambition to develop Nordic market leaders.

We have strong experience in development and implementation of growth strategy, building international organisations, execution of acquisitions and arranging finance.

What is private equity?

Private equity is an asset class and refers to funds organised as limited partnerships that make direct investments in unlisted companies. A characteristic of private equity investors is that they are active owners that develop the businesses. Ownership stakes can be majority, minority or consist of a combination of equity and debt instruments.

Private equity is ideally suited when, in order to realise specific medium-term value-creation opportunities, buyers must take outright ownership and execute decision-making power.

Want to grow your business rapidly and with strategic know-how?

Are you looking to scale up activities but require specific expertise and financial backing? Or is your business facing an operational turnaround? These are just some examples where private equity may prove a suitable ownership model. Learn more about CapMan’s private equity investment strategies below.

Private equity strategies at CapMan

We make significant minority investments in growing businesses seeking international growth.

TARGET COMPANIES
Entrepreneur-driven growth companies

APPROACH
Minority investments in small and mid-cap companies as an alternative to selling a majority stake

OFFERING
Active minority partner with an excellent track record of developing successful companies

We make majority investments in Nordic niche market leaders.

TARGET COMPANIES
Unlisted growing companies with strong cash flow and winning cultures

APPROACH
Nordic mid-market buyouts

OFFERING
A Nordic team based in Helsinki and Stockholm, 30+ years of experience and solid networks

We invest in in turnarounds and restructurings that help businesses return to the path of prosperity.

TARGET COMPANIES
Underperforming or non-core businesses that are facing a turnaround situation

APPROACH
Flexible use of both equity and debt instruments, majority and minority positions, and a strong platform and operational expertise to execute demanding operational transformations

OFFERING
Liquidity, financing, and operational expertise to support throughout the financial restructuring and operational turnaround process

A selection of current and former success stories

Private equity investment process

Private equity companies manage funds, which typically invest in unlisted companies. The private equity investment process starts from collecting capital for a fund and ends with returning committed capital and realised returns to fund investors.

Private equity fund managers raise capital from institutional investors to establish private equity funds. Typically, investors include both private and state pension funds, funds of funds, life insurance companies, foundations and other institutions. Often the fund manager also commits capital to the newly established fund. Private equity funds are typically organized as limited partnerships with a life cycle of approx. ten years. Capital is called from investors when investments are made into portfolio companies and returned after exits. The fund manager acts as an advisor to the fund making the investment and exit proposals and developing the investment targets during the ownership period.

The private equity fund manager maps potential investment targets for the fund. Generally, the targets need to fulfil certain criteria in terms of size, industry and life cycle phase in accordance with the fund’s strategy. In addition, the fund manager evaluates the attractiveness of each potential target based on its value creation and exit potential. Investment targets are usually sourced either through proprietary networks or by participating in auction processes. Efficient deal sourcing therefore calls for strong business networks across the fund’s target geography.

After an investment target is identified, a more detailed analysis on the business is performed. This due diligence analysis usually involves going through the company’s financial and legal documents in more detail, as well as evaluating its commercial attractiveness. Negotiations with banks to arrange financing are also initiated at this stage. Provided that bank financing is available and due diligence findings support the investment, final negotiations regarding the transaction are initiated.

Once the investment is made, the private equity fund manager starts developing the company based on a detailed value creation plan. In addition to financial capital, the manager supports the target company by providing sector knowledge, operational experience and access to a wider business/industry network. This usually involves taking a seat on the target company’s board.

Private equity investors are temporary owners. Consequently, a portfolio company is usually held between 4 to 6 years, during which the value creation plan is being implemented in co-operation with the management team. There are several alternatives available for the private equity fund to exit the investment. Most commonly exits take place via:

  • Trade sale to an industrial buyer
  • Secondary sale to another private equity fund
  • Listing through initial public offering (IPO)
  • Sale to the management group

Once the exit is finalised, the initial capital and proceeds from the investment are returned to the fund investors.

Learn more about private equity

Private equity enables the growth and development of unlisted businesses. The private equity industry started to evolve in the Nordic region in the late 1980s, when several private equity houses, including CapMan, were established.

Private equity investing consists of funds making equity investments in non-listed companies. Private equity investors are active owners. Besides capital, the investors provide the companies with strategic and managerial support. Value creation in private equity is primarily based on achieving increased growth and operational efficiency.

Private equity investments are usually categorised based on life cycle phase of the target company:

Seed/early stage investments

Financing for development and commercialization of a business concept.

Venture Capital

Minority/majority investments in early stage or expansion ventures.

Growth Capital

Typically minority investments in companies with major growth potential.

Buyout

Acquisition of a controlling interest in a company together with the operative management or an outside management group.

Special situations

Investments in distressed companies or companies operating in an industry with major changes.