Rooms for improvement - IK Investment Partners

CEO COLUMN
50 investments,
and more to come…
FOUR MONTHS INTO 2005 we are happy to
report that some significant events have
already taken place in our business this year.
We started off by closing our fifth fund,
the Industri Kapital 2004 Fund, with
commitments of €825 million (USD 1.1
billion), contributed by a large number of
existing as well as selected new investors.
Approximately 39 per cent of the committed
capital originates from the Nordic region,
36 per cent from the rest of Europe and the
remaining 25 per cent from North America.
IK2004 has just finalised its first investment
through the acquisition of Myresjöhus in
Sweden. This is a milestone investment as it
is not only IK2004’s first, but also IK’s 50th
investment since the start in 1989. We have
great belief in the potential of Myresjöhus.
We have also finalised three major exits
so far this year through the divestments of
Arca Systems, MacGREGOR and the final
tranche of Alfa Laval. To these final exits, we
can add two partial exits: Telefos companies
TA Teleadress and Multicom Security.
It is also very satisfying to be able to
report that some further steps have been
taken to strengthen our organisational
structure. The firm has broadened its senior
management team by adding Christopher
Masek, Partner responsible for Industri
Kapital’s French activities, and Detlef
Dinsel, Partner responsible for the firm’s
German activities to the Executive
Committee. They join Kim Wahl, Michael
Rosenlew, Gustav Öhman and myself,
bringing the total group to six senior executives.
At the same time, we have promoted
three team members to Partners. Trygve
Grindheim has become responsible for
investment activities in Denmark/Norway
while Kristiaan Nieuwenburg is now
responsible for Industri Kapital’s investment
activities in the Benelux region. In addition,
James Yates has been promoted to Partner
in his role as Head of Finance and
Administration.
These promotions reflect our firm’s
continued evolution since 1995, from a
Nordic to a Continental European private
equity firm, as well as the transition to
broader partnership governance of
the firm. This progress makes us all very
confident of IK’s long-term competitiveness,
success and future succession. We stand
well-equipped to take
advantage of the high
investment activity in
IK’s core markets and
to continue the valuecreating
work with our
portfolio.
Björn Savén,
Chief Executive,
Industri Kapital
Home
economics
Industri Kapital has staked a claim on Europe’s increasing appetite
for affordable, modular housing with its recent acquisition of
Myresjöhus, the Swedish prefabricated house manufacturer.
RECENTLY BOUGHT FROM the Swedish
construction company Skanska for just over
SEK500 million (€58 million), Myresjöhus is
one of Sweden’s leaders in the prefabricated
housing sector.
The company reported sales of SEK1.3
billion (€143 million) in 2004, has some 390
employees and – through its Myresjöhus and
Smålandsvillan brands – accounts for about
ten per cent of the €900 million Swedish
prefab housing market.
Myresjöhus had been part of Skanska for 31
years when the company took the strategic
decision to divest the business, as part of its drive
for core focus, at the end of 2003. The formal
sales process began at the end of January 2004.
“There were many potential buyers but I
quickly felt that Industri Kapital should be a
front-runner. They were very serious about the
business, highly organised and very professional,”
says Myresjöhus’ Chief Executive,
Mikael Olsson.
Just as IK was looking
closely at Myrejöhus’
management, so Olsson
and his team delved into
IK’s investment track
record and history.
“I have to say that we
could find nothing negative about the firm,
everything was entirely positive,” he says. “And
already IK has been very supportive and is full
of ideas. It is clear to us that the firm will not
be a sleeping shareholder but will have a key
role to play in our future,” Olsson continues.
IK was particularly keen to invest in
Myresjöhus due to similarities between this
opportunity and a successful previous
investment in the Swedish kitchen
manufacturer Nobia.
IK was also attracted by the company’s
strong momentum and relatively long order
sales cycle. “Because the lead time is six to nine
months this gives high visibility and comfort
with regard to the company’s projected figures,”
explains Samir Kamal who heads IK’s Swedish
investment team.
IK, with a team consisting of Samir Kamal,
Helena Stjernholm, Christina Fagerberg and
Christopher Fägerskiöld, achieved exclusivity
“The Swedish housebuilding
market is currently
at an historically low level
and is set to increase.”
on Myresjöhus in October last year and,
following exhaustive due diligence, the
transaction was signed on 21 December 2004.
The due diligence process concentrated
particularly on the commercial aspects of the
business, gauging the Nordic prefab housing
market’s strength and growth potential, as well
as the restructuring and expansion opportunities
within Myresjöhus itself.
Scope for acquisitions
The prefab housing market in Scandinavia is
not as straightforward as it might initially
appear. “Due to structural and regulatory
changes imposed by the Swedish government,
the industry declined sharply in 1992 and has
taken a long time to recover,” says Olsson.
Tightening consumer regulation in Sweden
is again raising costs, making it a difficult time,
particularly for smaller players. Says Olsson: “It
is clear that to be successful in this market you
need critical mass. It is now
time to really try to restructure
and grow this industry.”
A major strand in
Myrejöhus’ strategic plan, is
thus to add other house
manufactures to the group.
“We are certainly looking
to ‘buy-and-build’ and there is scope for
acquisitions from the consolidation of this
fragmented market alongside complementary
deals in associated activities,” says Kamal.
“There are also opportunities for significant
margin improvements at Myresjöhus through
standardising, streamlining and centralising
production and achieving synergies and
economies of scale through the company’s
growth,” he says.
A new home in two weeks
Although housing is a cyclical industry and
sensitive to interest rate rises, IK believes that
Myresjöhus also has considerable potential for
organic growth given the anticipated rising
demand for detached, high-quality, low-cost,
family homes in the Nordic region over the
next five years. “The Swedish house-building
market is currently at an historically low level
and is set to increase,” says Kamal.
2 ik news