The technology sector is helping private equity dealmaking in the Nordics ride out the wider market malaise, Eric Sanschagrin, managing director, technology, and Andreas Mentzer, managing director, financial sponsors group, at investment bank William Blair told PE Hub Europe.
There are signs of the Nordic deal pipeline filling for early 2024, said Mentzer, who looks after coverage in the region for William Blair.
“Generally in the Nordics, there was an expectation for a wave of new processes after the summer, which did not really materialise,” he said. “On the other hand, we are seeing a pick-up in pitching activity for assets that are looking to sell off of 2024 numbers. That’s part of a broader trend where shareholders are looking to get advisers on board early to be ready for a change in the market environment.”
Fundraising is also active and that build-up of capital “needs to be deployed sooner or later. That gives us confidence when looking into next year”.
Tech has been the “main driver” for the Nordics in 2023, added Mentzer.
“We’ve done seven transactions in the region so far this year and four of those have been technology related,” he said. “We have had a 100 percent conversion rate, which we are really happy about, given the current market conditions.
“Part of the reason is that there are a lot of younger Nordic companies that early on in their lifecycles have to address a European or global market, which makes them suitable for global buyers to pick up. The demand for those companies has always been there and that has helped our momentum.”
William Blair’s deals in the region include Main Capital Partners’ exit from Stockholm-based e-assessment company Assessio to Pollen Street Capital and Inflexion Private Equity Partners’ acquisition of a majority stake in Helsinki-based treasury and cash management software provider Nomentia from PSG Equity and Verdane.
“There’s been a concentration of activity in an enterprise value range between €150 million and €500 million,” said Sanschagrin. “These deals have been happening at a good pace. One reason is that in the last five to 10 years, the private equity sector in the Nordics has developed a lot. There’s been a lot of new regional players on the scene, with several funds ramping up.
“The 2016-20 deployments by these investors are producing a nice vintage of companies that are right in the sweet spot in growth versus profitability versus scale. We’re very focused on rule of 40 businesses, meaning companies with a combined growth and margin of at least 40.”
Slow going
More generally, there is a “mixed picture”, said Sanschagrin.
“There are signs of improvement. There are certainly signs that things are not getting worse. Our deal activity feels the same as it was in H1. For software in particular, there is a healthy trickle of new opportunities coming up, which we’re winning. We’ve got a very healthy dealflow, but are there clear signs that we’ve turned the corner? Not really. We’ve just landed at a place where there’s enough deals to keep us busy.”
Mismatching valuations are still holding up deals, even though average valuations are not “massively different” to 18 months ago, he added.
“The mix is different,” he said. “Companies with wrinkles, the vast majority of those will not trade. The ones that do manage to trade tend to be super-quality businesses, especially those with strong defensive qualities. Gross retention is probably the metric that’s most scrutinised right now in software. Typically, that’s mission-critical software, that once it’s installed, it doesn’t get replaced.”
Other subsectors enjoying strong tailwinds include ‘office of the CFO’ software, healthcare-related technology and software, manufacturing IT, and proptech for construction, and energy management, he added.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: 
