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latest digital edition of Nordic unquote

latest digital edition of Nordic unquote

+227% increase in

+227% increase in Swedish deal values from 2008 to end 2011 4 unquote.com/nordics The Eurozone, the EU, and the Nordics IN THE unquoteNordic Private Equity Index only 4% of respondents believe that the Eurozone crisis will have a major impact on the Nordic markets. The region remains isolated, but the Scandinavian countries are uniquely diverse in their approach to European participation. It has been described as a peninsula on its own, shielded from the continent by the Baltic Sea. Nonetheless, sentiments towards Europe vary vastly within the region. Unsurprisingly, Denmark, being the only Nordic country bordering Western Europe, was first to join the European Community in 1973. Sweden and Finland joined the EU in 1995, following public approval in referendums. Norway has rejected European participation twice: in a 1972 referendum on the EC (53.5% against), and a 1994 referendum on the EU (52.2% against). While it remains part of the European Economic Area and Schengen Area, it was prominently ignored on euro coins until 2006. Single currency currently contested Finland is the only Nordic country which has opted to join the Eurozone. A Danish referendum in 2000 rejected participation by 53.2% of the votes. Likewise, Swedes voted against the euro by 55.9% in 2003. Polls have varied over the years, with Norway being consistently against EU participation over the last five years. In October 2011, 72% of Norwegians were against joining the EU, while only 12% responded positively, according to pollster Synovate. In Sweden, public opinion has largely gone against the euro, apart from a brief period of support in mid-2009. Interestingly, the EUR/ SEK exchange rate was at an all-time high over the same period, at around 20% above average. A November 2011 poll by Statistics Issue 1 – February 2012 Sweden (SCB) revealed 80.4% of Swedes were against and only 11.2% in favour of adopting the European currency. Denmark seems to be the most europositive country, enjoying consistent support for joining the currency until mid-2010. An October 2011 poll by Greens Analyseinstitut revealed 65% against and a comparatively high 29% in favour of Eurozone participation. Nordic political leaders require popular support before venturing into either the EU or Eurozone. While opinion seems highly responsive to external events, the Nordic populations seem reasonably positive towards Europe. Sweden leads with big buyouts SIMILAR TO France, Nordic activity has been cut into two parts from June onwards and has been rebounding strongly since 2009. The 145 deals worth €11.1bn recorded in 2011 were largely made up of the large Dometic (€1.3bn) and Securitas AB (€2.3bn) buyout deals recorded in Sweden in April and June, whereas Norwegian activity went down to €1.6bn , albeit with numerous lower mid-market €50-250m deals. Volume 25 20 15 10 5 0 Volume Assuming that the Eurozone’s current problems are resolved, and the reputational damage is not too substantial, it would not be unreasonable to expect Denmark and Sweden switching currency at some point in the future. Nonetheless, the timing of a Danish or Swedish referendum would have to be perfect, and Norway remains unlikely to join anything European anytime soon. ■ Volume and value of private equity deals in the Nordics Value €bn Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Value (€bn) Source: unquote

Around three-quarters of commitments for the Nordics’ largest funds last year came from foreign investors Read more on page 6 unquote.com/nordics 5 R isky business: Threats to Swedish PE WITH RISK comes reward. Evidently, that formula works backwards too. The relative success of private equity, compared with other asset classes, has seen non-financial risks to the industry gain momentum in Sweden. Reputation The buyout industry has not escaped unharmed from recent criticism of the financial services. Triton and KKR-backed healthcare provider Carema suffered extensive reputational damage as story after story emerged in local press about patient mistreatment and staff discontent. The company suffered unknown financial damage as care contracts were cancelled by politicians. Media was quick to draw parallels to the profit-maximisation and value creation methods of private equity ownership. Moreover, the funds’ domicile in tax-efficient jurisdictions met fierce criticism as reporters described how profits were channelled from tax-funded welfare companies to tax havens. Regulation As other asset classes dive, the buyout industry appears to be faring reasonably well. The state has seen this as an opportunity to raise funds for its own coffers. The Swedish minister for finance, Anders Borg, signalled tougher times in mid-October, attacking the industry’s tax shields. The gift arrived by Christmas: a bill of up to SEK 1.8bn was handed to a number of IK partners by the tax authority, which resolutely maintains that carry must be taxed as standard income. In addition, the industry will have to battle with the indirect effects of a regulatory wave moving over Europe. Apart from Basel III and Solvency II, reports suggest that Sweden will be unable to escape a potential European financial transaction tax. Law-abiding citizens The Swedish developments highlight the need for active risk management. Several GPs have come to stress the importance of openness and kept a good dialogue with media. EQT’s recent move onshore shows that risk mitigation can cover many bases. The AIFMD allowed EQT to move into the EU without risking double taxation. But it is also safe to assume that the announcement will also be seen as a move away from a “tax haven” and be viewed positively by the public. Regulation, however, requires the lawmakers to provide a fair and transparent framework for local players. In an increasingly international world, and with the harmonisation of the European single market, the SVCA and GPs have stressed the importance of fair and competitive taxation. However the situation unfolds, unquote” will follow the developments closely in the coming year. ■ Mega-buyouts lead to mega-exits IF 2010 seemed like a good year for Nordic exits, 2011 saw the aggregate value more than double. The lion’s share consisted of mega-exits, Volume 80 70 60 50 40 30 20 10 0 2007 Volume 2008 Volume and value of exits in the Nordics 2009 Value €bn 2010 including the Nycomed trade sale at €9.6bn, Skype at $8.5bn, Phadia at €2. 5bn, and the partial sale of Gambro’s CaridianBCT at $2. 6bn. In some cases, portfolio companies were merely changing hands, such as Securitas Direct at SEK 21bn, and Com Hem at an estimated SEK 17bn. Notably, while volume follows an almost perfectly symmetric pattern, with a dip around 2009, 30 the value development is strongly asymmetric, 25 rising significantly over the last couple of years. A plausible explanation is that adverse exit conditions 20 in 2008-2009 pushed exits to 2010-2011. 15 Moreover, five of the portfolio companies – Com Hem, Gambro, Nycomed, Phadia, and 10 Securitas Direct – were acquired during the buyout boom between 2005-2007. Skype, being the 5 only exception, was bought in September 2009. 0 Com Hem, Gambro and Skype were valued at above £1bn, and the remaining three in the mid- to upper region of £500m-1bn. Source: unquote” 2011 Value (€bn) Issue 1 – February 2012

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