“Looking ahead to 2024, we anticipate positive momentum" | Nordic Capital

“Looking ahead to 2024, we anticipate positive momentum and increased activity, in the latter half of the year”

MARCH 07 2024

Stated Joakim Andreasson, recently promoted to Partner at Nordic Capital Advisors. Focusing on the Advanced Services sub-sector within the Industrial & Business Services (“I&BS”) domain, Joakim provided insights into the firm's collaborative approach and Nordic Capital’s investment strategies.

In today's rapidly evolving landscape, all sectors are witnessing dynamic shifts across markets, business models, manufacturing processes, and environmental considerations. Among Nordic Capital’s focus sectors, Industrial & Business Services, holds a specific focus on Northern Europe, with sub-sector focus in Advanced Services, Industrial Technology and GreenTech. Nordic Capital also targets high-quality companies that benefit from robust underlying growth trends and an expanding market position.

Q: Could you provide an overview of the current state of the private equity market for investments within the I&BS sector?

A: Reflecting on 2023, overall, we observed a decrease in transactions, with more emphasis on bilateral negotiations. Some deals fell through due to the inability of buyer and seller to align on terms. Globally and in the Nordics, there remains a keen interest in high-quality companies capable of enduring market conditions with a resilient performance. Nordic Capital’s successful exit of Consilium Safety Group in 2023 exemplifies this trend. Looking ahead to 2024, we anticipate positive momentum and increased activity, in the latter half of the year.

Q: In the I&BS sector, which specific sub-sectors is Nordic Capital targeting?

A: Within Industrial & Business Services, three main sub-sectors are prioritised: Advanced Services, Industrial Tech, and Green Tech. Nordic Capital’s geographical focus for I&BS spans the Nordic region, DACH and the UK. This strategic setup facilitates proactive sourcing, enables the construction of a shadow portfolio, and fosters pipeline generation, providing an enhanced ability to target desirable companies effectively and early on.

Q: Which sub-sectors do you focus on, and what prevailing trends do you observe within them?

A: In Advanced Services, our emphasis lies on identifying high-quality companies with strong growth potential and robust margins. Over recent years, sustainability and circular business models have gathered significant attention, with a strong growth outlook. Nordic Capital has strategically invested in companies such as Autocirc and Foxway, recognising the enduring importance of sustainability in driving market demand. Our goal is to identify companies composed to capitalise on these trends while leveraging Nordic Capital's expertise to enhance their value proposition.

Q: Could you provide insights into some of Nordic Capital’s recent I&BS deals and highlight any notable commonalities or trends observed among them?

A: The focus remains on non-cyclical businesses capable of long-term sustainable growth, which is crucial in a more uncertain economic climate. Nordic Capital prioritises companies with strong margins and long-term growth potential, exemplified by successful investments like Consilium Safety Group with profitability and predictable and growing aftermarket offerings. These types of investments generate a lot of interest from different types of buyers. Sustainability, circularity, scalability, and geographical expansion are key considerations in Nordic Capital’s investment decisions. A proactive approach, coupled with advice in bilateral negotiations, underscores our commitment to securing promising opportunities.

Q: How is the sub-sector adapting to the changes brought about by digital transformation?

A: Digitalisation has been a dominant theme, impacting nearly all Nordic Capital’s portfolio companies. Scalability and increased efficiency are crucial, and therefore, driving the adoption of digital solutions across the portfolio has been monumental. Embracing digital transformation enable the portfolio companies to optimise processes and enhance margins. It's a fundamental tool in driving sustainable growth and remains a central focus across Nordic Capital’s portfolio companies. AI is becoming more relevant for most companies and could offer significant opportunities.

Q: How does Nordic Capital partner with and support the management team in portfolio companies?

A: Nordic Capital maintains a clear governance model where companies retain autonomy in their operations. However, as an active owner, Nordic Capital offers support through board-level guidance as well as resources from our Operations Advisory Team. A unique aspect of the approach is the utilisation of “Black Belts”—a specialised group of over 100 external functional experts deployed directly into portfolio companies, when needed. This resource is highly valued by the portfolio companies, as it brings additional expertise and support. Finding the right balance is crucial; while Nordic Capital provides resources, it's essential for management teams to retain ownership and draw upon these resources effectively. The collaboration intensifies during the initial 100 days post-acquisition, ensuring a smooth transition and alignment of strategies.

Q: What criteria do you consider when constructing a shadow portfolio?

A: Constructing our shadow portfolio involves a rigorous selection process. Nordic Capital adheres to a clear investment strategy, focusing on high-quality companies with strong growth potential, margin potential and scalable business models—and where Nordic Capital as owner can add significant value. When identifying prospective companies, we closely align them with Nordic Capital’s approach and sector focus. Once included in the shadow portfolio, we engage actively with these companies, deepening our understanding of their operations and growth prospects. This proactive approach allows us to establish early relationships, facilitating steady transactions when opportunities arise.

Q: How would you describe the Nordic Capital culture?

A: Over my tenure of more than 15 years at Nordic Capital Advisors, I've witnessed the cultivation of a robust and collaborative culture. Our team operates as one cohesive unit, driven by a shared commitment to success. Despite our growth over the years, we've successfully preserved this culture—a testament to our collective efforts. Our performance-driven attitude fuels our collaborative spirit, fostering an environment where achievements are celebrated together.

"“Looking ahead to 2024, we anticipate positive momentum and increased activity, in the latter half of the year”"