Verdane: Larger co-investments could make 2024 comeback

'Many of the largest co-investment LPs were less active in 2023, leading to strong dealflow for smaller-and mid-sized LPs with co-invest programmes,' says Verdane partner Frida Einarson.

Frida Einarson, Verdane

Larger co-investment focused LPs might make their way back into the market in 2024 after a quieter 2023, Frida Einarson, partner at Verdane, told PE Hub Europe in the next instalment of our outlook series with senior private equity investors.

Verdane is a growth investment firm with offices in Berlin, Copenhagen, Helsinki, London, Oslo, Munich and Stockholm. Its recent activity includes acquiring stakes in software companies Meltwater and Jobylon and leading a funding round in Urban Sports Club.

What do you expect 2024 to look like for private equity co-investments?

Many of the largest co-investment LPs were less active in 2023, leading to strong dealflow for smaller-and mid-sized LPs with co-invest programmes. At the same time, on the supply side many GPs, particularly in the mid-market, used co-investments to optimise their remaining funds in a tough fundraising environment.

We expect this to continue in 2024, with the nuance that some of the larger co-investment focused LPs may be back in the market, dampening dealflow somewhat for mid-sized co-investment focused LPs.

How do you expect the first six months of PE dealmaking in 2024 to compare with the last six months of 2023?

General partners that raised in 2023 are under pressure to deploy that capital in 2024 after a relatively quiet deployment year in 2023. This means that we would expect more dealmaking in 2024 than 2023, with a focus on businesses with strong underlying profitability.

Looking specifically at Verdane, we kept a steady deployment pace in 2023 and were net investors, unlike 2022 when we in fact were net sellers.

What kinds of deals can get done today?

Companies on solid trajectories in structural growth markets are always interesting. There is also a robust market for portfolio deals, an area we have a rich history in having completed more than 60 portfolio acquisitions since Verdane’s inception in 2003. At Verdane, we always think that taking a partnership approach is key for us to execute deals and this is even more important in an uncertain market.

We observe that the market was bifurcated in 2023, with some deals not getting done at all, but high-quality assets transacting at healthy valuations.

What’s keeping you up at night?

The macroeconomic environment in 2024 remains more difficult for many businesses and we want to make sure that we’re the best long-term partner we can be for companies in 2024 – and beyond.

What are you looking forward to most in 2024?

European businesses are growing and innovating at an exciting rate, and it is a privilege to support our portfolio companies as they scale. In 2023, we were pleased to see that our portfolio companies grew revenues over 20 percent organically, and we will do all we can to help them maintain that momentum.

I personally look forward to many interesting LP dialogues, as always.

Editor’s note: PE Hub Europe is running 2024 outlook Q&As with senior private equity dealmakers through December and January. The previous instalment was with Oliver Haarmann, founding partner at Searchlight Capital Partners.