Finnish Private Equity investors exited a total of 72 companies in 2018 – interest in listing has subsided considerably
In recent years, approximately half of the companies listed on the Helsinki Stock Exchange, both in the Main Market and First North list, have been Private Equity (PE) backed, according to statistics from FVCA. The association has again collected a list of PE investors’ portfolio companies with potential to be listed in the coming years.
PE investors invest in unlisted companies with strong growth potential. For startup and growth companies, PE investors offer a wide range of support for implementing their growth plans. However, every successful PE investment leads to exit from the target company within approximately 5-7 years. At the end of the ownership period, the company is exited, for example, by listing it on the stock exchange, or by selling the company to an industrial buyer or another investor to implement the next phase of growth.
In 2018, in terms of value at cost, the most popular exit method among Finnish PE investors was selling to another PE investor (57% of all domestic exits) followed by industrial acquisitions (17%). Enthusiasm for listing has been clearly milder than before, and the decreasing trend has intensified since 2015.
In 2018, Finnish venture capitalists exited a total of 40 growth companies and 32 startups. Of these companies two were listed on the main list of Helsinki Stock Exchange: Harvia and Tallink (cross listing). VMP, Viafin Service, BBS and Rush Factory were listed on First North.
The maturity, attractiveness, and growth drive of the PE investors’ target companies determine the exit method. This view is supported not only by the PE industry statistics but also by the recent master’s thesis of Translink Corporate Finance analyst Oskari Auramo.
“Listing seems to be more likely the more mature the company is, and the more interesting it is from investors’ perspective. Between 2012 and 2018, the average turnover for PE portfolio companies listed on the Main List and First North has been € 237 million, while for companies sold to industrial buyers it has been € 61 million. Rather than listing, smaller companies have been more likely to find an industrial buyer due to the fitting business focus and synergy” comments Auramo.
“One trend nowadays, both domestically and globally, seems to be that companies continue to grow longer unlisted and companies grow with different PE investors from one growth phase to another. In addition to funding, companies need expertise to realize their growth, which has reinforced the importance of PE as a channel for funding. In addition, fund investors have been pleased with the returns of private equity funds, strengthening the significance of private equity funds as investments, and channeling more capital to them in Finland, Europe and globally” says Pia Santavirta, Managing Director of FVCA
In 2018, the PE investors’ average minority investment in growth companies was € 3 million (growth) and majority investment (buyout) € 8 million. At the same time, companies raised an average of € 8 million in capital for growth from First North listings. On the main list, an average of € 57 million was raised per new listing.
Potential listings coming?
“Despite the decrease in the number of listings, PE investors will continue to play a key role in creating new listed companies in Finland. For the functioning of the market, it is important that the Helsinki Stock Exchange remains viable. However, the transformation of financial channels is affecting every industry and actor” says Santavirta.
In this year’s survey, 52 potential new domestic listed companies have been identified. The list has been compiled from an enquiry sent to PE investors and is noncommittal. The companies have the potential to be listed in the next five years, although the final decision will depend on many factors.
“This large group of companies is very diverse. This time again, the list includes both startup and growth companies, whose growth path might as well lead to the stock exchange as to another PE investor or an industrial buyer. From the entrepreneur’s perspective, the option enabling the best possible growth also in the future should of course be chosen” comments Santavirta on the companies in the list
Musti ja Mirri
Quattro Mikenti Group
FVCA, Managing Director
+358 40 546 7749
Translink Corporate Finance, Analyst
+358 40 739 5322
FVCA is the industry body and public policy advocate for the venture capital and private equity industry in Finland. As the voice of the Finnish VC and PE community and the entrepreneurs they fund, it is our role to demonstrate the positive impact of the industry on the Finnish economy. The majority of Finnish private equity firms are members of the association. www.paaomasijoittajat.fi @FVCAfi