1,3 billion euros invested into Finnish later stage growth companies in 2018 – who invests and how much?
Finnish startups and growth companies received a record amount of investments in 2018. Earlier in the spring, we wrote an in-depth analysis of the development of the Finnish venture capital industry and the investments into startups. In this analysis, we dive deeper into the other part of the private equity industry –the buyout and growth markets and the investments into later stage growth companies.
The term buyout refers to various corporate restructuring arrangements. From the point of view of private equity investors, these are often buyouts with a majority stake or growth investments with a minority stake. Instead of investing into startups, both buyout and growth investors invest into later stage growth companies, which we define as established and steadily growing companies with a turnover of a few million to hundreds of millions of euros at the time of investment. Like startups, these more established growth companies still have considerable potential for growth, which private equity fuels.
All in all, the year 2018 has been an excellent year for Finnish private equity – read our entire analysis from the Finnish buyout industry below.
Finnish private equity focuses on Finnish companies
In 2018, a total of EUR 309 million was raised from LPs into Finnish private equity funds. Now the Finnish private equity investors have a total of EUR 1.7 billion of dry powder, which will be invested in Finland’s best growth companies in the future.
Last year, Finnish private equity investors invested a total of EUR 447 million in Finnish and foreign growth companies. A record amount of minority-stake growth investments was made – a total of EUR 177 million. Additionally, majority-stake buyouts also surpassed last year in terms of the total invested sum.
The increase in minority investments is driven by both an increase in demand and supply: Finnish growth companies need the help and financing of an experienced investor without giving up their company ownership, for example, in generational change situations and, on the other hand, there have been more investors, such as Bocap, Juuri Partners and CapMan Growth funds, offering these types of arrangements in Finland in recent years.
Altogether, the EUR 447 million investment sum was invested in a total of 89 Finnish and foreign growth companies. Over 90% of these investments, both in euros and in numbers, were invested in Finnish companies. This reflects the strong confidence and trust the Finnish investors place in the growth potential of Finnish companies.
In 2018 the average size of growth investments made by Finnish investors was EUR 3 million, whereas the average size of buyout investments was EUR 8 million. In total Finnish investors completed EUR 264 million worth of buyouts in 2018.
There are some quite interesting phenomena in the divestment activity of Finnish private equity investors. There is a downward trend in IPOs – both in Finland and globally. Instead, selling to another private equity investor has gained popularity. This can be explained partly by the development and maturation of the private equity industry in Finland: there are more investors, and funding is available for many stages of development. In addition to financing, companies receive valuable support and assistance from private equity investors, making it an attractive growth path.
Finnish growth companies attract both Finnish and foreign investors
Finnish growth companies received a total of EUR 1.3 billion in investments from Finnish and foreign private equity investors to finance their growth. The clear majority of the total investment sum comprises of buyout investments, a total of EUR 1.1 bn. However, in terms of number of companies receiving an investment, there were more growth investments than buyouts – a total of 53 Finnish companies received growth investments, while buyouts targeted 41 companies.
In total, this investment sum was distributed among 96 Finnish growth companies, most of which make business or consumer products and services (37% and 15%) or operate in the ICT sector (15%). Biotechnology and healthcare also attracted a larger share of investments than in previous years (15%).
The share of foreign investments out of the total sum of EUR 1.3 bn was 67 %. Finnish growth companies attracted EUR 871 million of foreign investments, which was invested into 15 companies. Foreign investors are often involved in the largest deals. Although foreign investors also made some minority growth investments, they formed only a very small part of the total foreign investments measured in euros.
The Finnish private equity industry as a whole
In addition to private equity investors making buyouts and growth investments, venture capital (VC) investors are also involved in the private equity industry in Finland. VC investors invest in startups and in early stage growth companies. In total, all Finnish private equity investors invested EUR 583 million into Finnish and foreign startups and growth companies in 2018. In the long-term, Finnish VC investors invest about 25 % of all of their investments into foreign companies, whereas buyout and growth investors invest 14 % into foreign companies.
Altogether, Finnish startups and growth companies received a record-breaking EUR 1.5 billion worth of investments in 2018. This includes investments made by both Finnish and foreign investors.
FVCA, Managing Director
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FVCA, Head of Analytics
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