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Nordic private equity groups are boosting their acquisitive presence across the region in the face of heightened takeover interest from global tech players searching for investment opportunities.
Growing international interest in the Nordic region became clear after Mastercard’s €2.85bn purchase of the Copenhagen-headquartered Nets Group’s corporate payments platform business.
Acquisitive corporate eyes are also trained on Klarna, the rapidly expanding Swedish online digital payments company. Klarna is expected to attract attention from emerging paytech players such as Apple, Facebook, PayPal and Google, all of which are growing their footprint and looking for acquisition opportunities in the Nordics.
The Nordic mergers and acquisitions (M&A) sphere has long been the almost exclusive domain of major private equity groups such as EQT Group and Nordic Capital, along with the region’s high-profile technology companies Proact IT Group, Tieto and Enea.
For example, Tieto’s ambition to grow globally through strategic Nordic M&A deals was demonstrated in June when the Finnish IT company agreed merger terms with Norway’s Evry. The merger, with Tieto as majority owner, will create a company with revenues of €3bn.
The new company, TietoEvry, will employ 24,000 people worldwide, including IT professionals and digital consultants. Kimmo Alkio, CEO at Tieto, said the merger was driven by the need to create a strong Nordic force in IT, digital and cloud services.
But Mastercard’s €2.85bn takeover of Nets’ corporate payments business served as a timely reminder for Nordic private equity companies and IT groups that the traditional landscape is changing as more global actors chase strategic acquisitions in the region. The deal, the largest for a Nordic paytech business to date, saw Mastercard acquire Nets’ account-to-account-based services unit, which includes clearing, instant payment services and e-billing systems.
Bo Nilsson, CEO of Nets, said the sale of the “non-core” account-to-account business to Mastercard was a logical move by the Danish company to gain accelerated traction in its core business areas through organic growth and acquisitions.
“The deal increases our flexibility to play an active role in our sector’s consolidation,” he said. “Moreover, it enables us to expand our leading position as a one-stop payment shop for merchants and a stronger provider of processing services for banks across Europe.”
Expectation that Klarna could emerge as an acquisition target increased in the wake of improved financials and the $460m harvested by the company in its latest equity funding round in August. The cash-raising exercise increased Klarna’s market value to $5.5bn, ranking it as Europe’s largest privately owned fintech.
Klarna has dismissed suggestions that it could become an immediate target for a global paytech sector giant when its revenues climb above the €1bn mark. CEO Sebastian Siemiatkowski said that although the company’s revenues are expected to come close to, or exceed, that figure by the end of 2019, its chief focus will remain on developing its digital payments products within a growing global customer base.
Read more about Nordic tech mergers and acquisitions
- The Nordic tech startup scene is attracting funding from a variety of sources, with private equity firms, banks and traditional IT companies all keen to put money in.
- The merger of Tieto and Evry is only part of the widespread consolidation that is hitting the region’s tech sector.
- The vibrant tech sector in the Nordic region is attracting increasing attention from venture capitalists.
Olof Hernell, chief digital officer at EQT Group, said the acquisitive appetite of Nordic private equity firms for more tech deals remains strong and unrelenting.
For private equity companies and their targets, the future competitive advantage lies with companies that can systematically capture and leverage data, said Hernell. “Not only external and performance data, but also human predictions, judgements and decisions,” he added.
“One of the major challenges we face is the risk of categorising deals as ‘tech deals’ and ‘non-tech deals’,” he said. “Today, every deal can be viewed as a tech deal. Even the most traditional industries are facing fundamental technology changes and disruption, and those in the private equity industry who continue to view the world solely through traditional lenses will probably invest in the wrong companies and leave a lot of value on the table.”
EQT has added a number of high-profile IT and fintech companies to its investment portfolio since June. In September, it acquired Inexio, a provider of high-speed fibre-optic internet access to retail customers and businesses. Extending its reach outside Europe in July, EQT bought a majority shareholding in an Australia-based managed IT services provider.
Swedish private equity group Nordic Capital’s regional tech investment activity in 2019 included the acquisition of the Denmark-based IT security and networking infrastructure firm Conscia. Ownership of Conscia was bought from Danish venture capital group Axcel for an undisclosed sum. Conscia is projecting revenues of more than €270m in 2019.
A rising number of Nordic Capital’s deals are falling into the next-generation paytech space. Among these was the equity group’s decision to take a majority ownership position in Trondheim-based Signicat, a verified digital identity systems provider and hub operator.
For Signicat, the acquisition by Nordic Capital brings a fresh source of money and industry expertise that will enable it to consolidate its position in the Nordic market while expanding across Europe.
Nordic IT groups are also casting their M&A nets into the wider northern European marketplace. Proact-IT has strengthened its market foothold in the Benelux countries through the €17m acquisition of Dutch IT managed services provider PeopleWare. The deal is part of Proact-IT’s goal of building its small and medium-sized enterprise (SME)-targeted managed cloud services in both its home Nordic marketplace and in the broader Baltic and northern European area.
“Our Nordic market position is robust and strengthening,” said Jonas Hasselberg, CEO of Proact-IT. “PeopleWare gives us a stronger position in the Netherlands and Belgium, in particular. Gains include a more dynamic portfolio and skillset covering hybrid cloud deployment models. It improves our ability to deliver high-growth managed cloud services into the medium-sized enterprise sector.”
Other Nordic tech groups have also been busy on the acquisition front in the second half of 2019. Bambuser bought online video chat solutions firm Viddget and Atea acquired DatabaseForum, a data analytics and database hub provider located in Stavanger. In Sweden, Miss Group has acquired all shares in Ballou, a hybrid cloud and shared web hosting services company. Telenor, meanwhile, is on course to close its purchase of Finnish telco and internet of things company DNA in December.