Syndication reborn?

Jyrki Tähtinen from Borenius Attorneys ltd walks us through some changes in Finnish PE industry during last two decades and challenges us to think bigger.

Remember the early days of Finnish Private Equity in the beginning of 1990’s? The total commitments to a PE fund started from 20 MFIM and could a bit later reach a tenfold of that. Given the diversification theory (yes, we did indeed know about that already then) the average equity ticket from a garden-variety Finnish PE fund was not exactly earth shattering. To add to the insult the banks were not as focused on PE houses as repeat lenders as they are today. The result of the above? Buying smaller and riskier growth companies? No invitations to PE house of the year awards? Yes, some of that but Finns have always been good with scarce resources and uniting themselves at the time of trouble. Introduce out of the baby box (“äitiyslaatikko”) thinking and syndication. One of the most out of the main street funds was Fenno. Two PE houses came together to raise a 250 MFIM Fund with Boeing paying the management fees for all investors for the life of the fund at one go as counter purchase for the new fighter planes. In addition an opt-out co-invest side fund with first tier global investors (think Abu Dhabi Investment Authority, GE Capital and the likes) was raised. The resulting in-vestments included Eltel, Affecto and Normet. Some PE houses tested co-investing with each other or their LPs to reach bigger deal sizes and more established target companies.

A number of Finnish PE houses have lately raised 200+ MEUR funds. Some Nordic houses have leveraged their brands to raise similar size and investment focus funds along their bigger Billion EUR funds. This could easily lead to an increased competition on the 50+ MEUR deals (as if the price levels weren’t already high for the better assets). One often hears that certain bigger deal sizes are out of reach and opportunities are passed. Given that PE houses with their feet on the ground have a natural advantage to create proprietary deal flow it is shame that thinking big is not more in fashion. Introduce syndicating with the other locally based or foreign PE houses. Think of speaking the same deal driven language and ability to execute at the controlled auction speed – great minds think alike. Ask your legal advisor to dust off the syndication documentation (both bid phase and execution) and off you go to bigger deals and more deal flow without betting the LPs’ farm.

There are a limited number of dancing partners – who is going to pre-empt first?

Jyrki Tähtinen
Senior Partner
Borenius Attorneys Ltd