Nordic Private Capital Day
14 February 2017
The Grand Hotel, Stockholm
Written by Rebecca Ford
Mirja Lehmler-Brown of Aberdeen, in making the succinct definition in the title of this post, neatly summed up the fundamental aims of the private capital asset class in the Nordic region and across the world. As a complicated and expensive alternative asset class, those involved within and without private capital can often find their view fogged by the delicate balancing required for managing capital, risk, talent, portfolios, politics, operations, returns, and every other aspect of the investment chain. It’s easy to forget what the ultimate goal is: to nurture and develop businesses so that they can operate and provide a service to their best of their ability. At the Nordic Private Capital Day 2017 in Stockholm, our distinguished speakers offered their best insights into how to do this most effectively in the current regional and global climate. Here are five key takeaways from our Opening Panel discussion.
1. You can try looking ahead, but right now the horizon is closer than ever
Thomas von Koch, managing partner and CEO of EQT partners said simply that “we have absolutely zero visibility”, and with massive political disruption in Europe, the US, and across the globe, his assessment may be accurate. He suggested that in this time of uncertainty, investors should forget about the things they cannot control, and focus on just continuing to buy and transform businesses as best they can. Anders Borg, director and head of Nordics at KKR, took a more optimistic approach to volatility, noting that “it opens up opportunities in the market”, whereas Allan Polack, Group CEO of PFA Pension, said that their “biggest consideration going forward is risk management”.
“We cannot impact Trump, nor May, nor Marine le Pen – we just need to do our business.” – Thomas von Koch
2. Back-to-basics private capital: who are we and what are we doing?
Mirja Lehmler-Brown, investment director and head of DACH and Nordics at Aberdeen Asset Management, suggested that with “lots of volatility, low growth, and lots of capital creating very high pricing”, the industry needs to reflect on what its fundamental purpose is. She added that if it was easy to maintain a 20% return target, everyone would be doing it. On this point, Anders Borg agreed that this asset class should be focusing on more operational improvements, buy and build strategies, consolidating industries, and working with more complex deals.
3. Don’t forget that Brexit isn’t just about the money
The speakers generally agreed that as the pools of capital in private equity are global, the UK’s exit from the European Union will largely not affect them. Thomas von Koch said that the degree of impact for most companies will depends on where their funds are based and where their assets are intended for use. Mirja Lehmler-Brown was clear in supporting a strategy of careful market examination, and making sure to back industries and trends which are likely to continue growing regardless of political instability. Jessica Nilsson, a partner at VC firm Northzone, reminded us that even if Brexit doesn’t affect funds, it will affect talent pools within the industy, particularly in the tech sector. 70% of tech talent in Europe comes from the Nordics, the UK, and Germany, and “if political risk will continue, I think the talent pool will move”.
“What can new technology do to old companies? Because that’s a 14 trillion-dollar opportunity.” – Thomas von Koch
4. Industrial sector focus is about buzzwords and business models
Anders Borg said that KKR was focusing on current trends in digitalisation, care, and welfare, while Thomas von Koch said that for EQT, telecom is the big thing du jour. Jessica Nilsson said that outside of the Nordics’ traditional strengths in fintech, gaming, and enterprise, new sectors on the rise include property tech, food tech, and e-commerce. She described fintech as “a buzzword”, and Allan Polack warned that with so many fintech companies emerging, there can’t possibly be a positive outcome for all of them. Jessica Nilsson also advised that when fintech companies fail, it is often due to bad planning at the business model stage – if they are not providing a service that’s genuinely useful for the industry, it won’t be a long-term sustainable project.
5. Success is about getting the right people and encouraging cooperation at every stage
Mirja Lehlmer-Brown said that with portfolio companies, it’s important to focus on HR, talent management, and organisation factors to foster value creation. Meanwhile, Jessica Nilsson noted a current trend for increasing synergy within investment portfolios, with CFOs and CMOs starting to cooperate and share expertise. She said that “we cannot force them to work with each other”, which Allan Polack agreed never works, “but what we can do is enable knowledge sharing”, allowing companies to grow in parallel, under the supervision of the investor.
Stay tuned to find out more about our upcoming official report!