The Number of Growth Companies That Received a Buyout Investment Remained Stable During the Pandemic Year – The M&A Market Looks Lively
Buyout investors invested €851 million in Finnish growth companies in 2020. Of the total amount invested, €320 million came from domestic investors and €531 million from foreign investors.
74 Finnish growth companies received a private equity investment in 2020. Investment activity was on the same level as in previous years, despite the COVID-19 crisis.
Last year, well over half of the buyout investments made in Finnish companies, €531 million, came from foreign private equity investors. These investments were made in 16 companies.
New investments by domestic and foreign investors were made, for example, in the engineering firm Nitor, which is committed to sustainable digital development and PHM Group, which provides property maintenance services in Finland and Sweden. Evondos – Nordic market leader in medication dispensing services – also got an investment in 2020.
Verdane, one of the most active investors in Northern Europe, is also investing in Finland.
“Our goal is to invest €150–200 million in Finland and the Nordic countries in the next few years. There is a huge number of potential companies in Finland, for example in health tech, so we are following the field closely,” comments Janne Holmia from Verdane, Chairperson of the Board of Finnish Venture Capital Association (FVCA).
According to Invest Europe statistics, the number of companies in Europe that received a buyout investment dropped by 11% in 2020.
“Private equity investors are active owners. During the pandemic, they have helped their existing portfolio companies with additional funding, for instance. Despite this, new investments were made in Finland at the pace of the previous year. It reflects the fact that private equity investors believe in Finnish companies,” comments Pia Santavirta, Managing Director of FVCA.
Domestic and foreign private equity investors invest in companies that have the potential to become market leaders in their respective fields. They accelerate growth by bringing their portfolio companies not only capital but also expertise to implement growth plans. According to an economic impact study conducted by FVCA and KPMG, the portfolio companies of private equity investors grow nine times faster than peer companies in terms of turnover and five times faster in terms of the number of employees.
New Funds and Exits
Finnish buyout investors raised a total of €443 million in their funds in 2020. New funds were raised by Sponsor Capital, which focuses on majority investments, Bocap, which makes minority investments, and Verso Capital, which invests in spin-offs of large companies.
The new funds raised will accelerate the growth of domestic companies, in particular. In 2020, as much as 97% of Finnish buyout investments were made in Finnish companies.
Private equity investors own a portfolio company for a certain growth phase, after which investors exit, i.e. sell their stake in the company. During 2020, a total of 32 Finnish companies were divested. These companies included the hyperspectral camera supplier Specim, the real estate maintenance service company Kotikatu and Profit Software, which provides financial system solutions and consulting services. The profits from the exits are then, in turn, distributed to fund investors, such as Finnish pension funds.
Activity in the M&A Market Increased from the Previous Year
According to FVCA’s recent survey for Finnish private equity investors, activity in the M&A market has increased considerably compared to the situation six months ago.
42% of investors who responded to the survey see more high-quality investment opportunities than before, and 56% say that the number of contact requests from companies has increased.
“The outlook for the future has become clearer, and the situation in the M&A market also looks positive,” Santavirta comments.
Finnish Venture Capital Association
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Private equity investors are active owners. They invest in unlisted startups and growth companies aiming at strong growth, innovation, and internationalisation. Private equity investors bring their portfolio companies not only capital but also risk appetite, expertise, and extensive contact networks. Private equity investors typically exit the portfolio company after 3 to 7 years, after which the company moves on to its next strategic growth phase. Potential exit methods include, for example, an IPO, selling the company to another private equity investor or a trade sale.
Private equity investors can be divided into two separate groups.
1) Venture capital investors make investments from venture capital funds into startups, becoming minority owners in their portfolio companies.
- Startups are young innovative companies, which typically strive for rapid international growth with a scalable business model.
2) Buyout investors make investments from private equity funds into later-stage growth companies. Most buyout investors become majority owners in the companies they invest in, but there are also some growth investors in the market who make minority investments.
- Later-stage growth companies are businesses with well-established operations and turnover, as well as the potential for continued growth. Turnover can range from a few million to hundreds of millions.