how capman public market fund brings private equity value...

How CapMan Public Market Fund brings private

equity value creation approach to the Nordic listed

market?

30 October 2009

Jukka Ruuska, Head of CapMan Public Market, Senior Partner

Contents

CapMan Public Market in brief

• Market environment and deal flow

• Value creation approach

3 CapMan Capital Markets seminar 2009 30 October 2009

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Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

OMX Nordic Mid Cap Index

History of CapMan Public Market

1st CLOSING

OF CAPMAN PUBLIC

MARKET FUND I

1st

INVESTMENT

ANNOUNCED

CapMan Q1/2007:

“INVESTIGATING

EXPANSION TO PUBLIC

MARKET”

A1

A1

A1

A1

2nd

INVESTMENT

ANNOUNCED

A1

https://www.capman.com/En/InvestmentOperations/CapManPublicMarket/

http://www.nobia.com/sv/

http://www.intrum.co.uk/index.asp


CapMan Public Market in figures

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20

40

60

80

100

120

140

160

Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009

30 September 2009

Capital under management, MEURCapital under management MEUR 138

FundCapMan Public

Market Fund I

First / final closing July 2008 / July 2009

# of team members 6

# of portfolio companies* 1

# of Nordic exits completed 0

# Investment opportunities

analysed39

*Portfolio companies = published portfolio companies


Team of six investment professionals in two locations

Heikki Westerlund* M.Sc. (Econ.)CEO, CapMan Plc, Senior PartnerJoined CapMan in 1994

* Contributes to CapMan Public Market’s operations as a member of the investment committee. ** Will join CapMan Advisor Network in January 2010.

Conny Karlsson

BA

Advisor

Jukka Härmälä

M.Sc. (Econ.)

Senior Advisor

Olli LiitolaM.Sc. (Eng.)

Senior Partner

Joined CapMan in 1991

ADVISORS

Jukka RuuskaM.Sc. (Econ)Head of CapMan Public Market, Senior Partner

Former Deputy CEO of OMX


Timo Peltola

B.Sc. (Econ.),

Dr. Of Economics (hc)

Advisor

Mikael MollM.Sc. (Econ)Investment Analyst

Formerly Merrill Lynch, UK


Joakim RubinM.Sc. (Eng.)Senior Partner

Former Head of Corporate

Finance, Handelsbanken


Raul Etelämäki

M.Sc. (Econ)

Investment Analyst

Formerly UBS, London


Karl Åberg

M.Sc. (Econ)

Investment Director

Formerly Handelsbanken


Teuvo Salminen

M.Sc. (Econ.),

certified public accountant

Advisor**

http://media.digtator.fi/digtator/file?ac=show&folder_id=44&link_id=685&org=6&view=0


Investment strategy

• Nordic public companies

– Market capitalization typically MEUR 50–400

– Significant value creation potential

• Influential minority investments

– MEUR 10–30 equity investment per company

– Target ownership stake of above10%

• Friendly approach based on co-operation with main owners and

other stakeholders

• Long-term value creation via active ownership

• Wide industry focus

Contents

• CapMan Public Market in brief

Market environment and deal flow

• Value creation approach


Large investment universe

• Aggregate market capitalization for the Nordic public market around

EUR 660 bn with 1,094 companies

• Some 320 public companies within the fund’s investment focus*

12%

22%

20%

46%

Sweden Finland Norway Denmark

Breakdown by country Breakdown by market capitalization

54%

13%

16%

8%

9%

< MEUR 50 MEUR 50 - 100

MEUR 100 - 400 MEUR 400 - 1000

>MEUR 1000

* Market cap at MEUR 50–400


Equity and credit market environment

OMX Nordic Mid Cap Index development

0

20

40

60

80

100

120

140

160

180

1Q 2Q 3Q 4Q

EUR bn

0

40

80

120

160

200

240

280

320

360

Deals

#

Senior leverage loan development

Source: S&P LCD, Nordea

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50

100

150

200

250

300

350

400

450

Jan-0

7

Apr-0

7

Jul-0

7

Oct-0

7

Jan-0

8

Apr-0

8

Jul-0

8

Oct-0

8

Jan-0

9

Apr-0

9

Jul-0

9

Oct-0

9

OMX Nordic Mid Cap Index

• Market valuations still at reasonable level

• Poor availability of LBO loans only a few delistings by private equity firms

• Increasing share and hybrid loan issue activity

– €785 million raised in Helsinki stock exchange in 1–9/2009, vs. €250 million raised in 2008

– Potential entry for CapMan Public Market Fund?


Dania

Creval

Single country

Eq

uit

y i

nve

stm

en

t

Nordic Pan-European

<M

EU

R 1

0>

ME

UR

50

3i

Latour

MelkerSchörling

AB

Industri-värden

Audley

Skanditek

LE Lundbergs

Traction

Kinnevik

Atine

CapManPublicMarket

FerdInvest

Lannebo

Accendo

Böös&Enblad

Nordstjernan

Competitive landscape – potential partners

Cevian

Explora Active

Henderson

Hermes

ME

UR

10

-5

0

Catella

Altor

Investment style/tradition

Private equity

tradition

Equity trading,Hedge fund tradition

Investmentcompanytradition

Öresund

Status unclear/no-funds/withdrawn/change of strategy

Säki

Geography focus

Investor


Strong deal flow derived from various sources

• 39 investment opportunities analysed

• Deal flow concentrated to Finland and Sweden

23%

46%

31%

CapMan Company itself Intermediary

Deal flow by source Deal flow by location

21%

3% 3%

73%

Finland Sweden Denmark Norway

Deal flow 7/2008 – 10/2009


Deal flow since July 2008 - high selectivityDeal flow 7/2008 – 10/2009

39 with A3 status

Investment opportunity identified and analysed

10 with A2 status

Preliminary investment case established

2 investments

5 with A1 status

Investment decision


http://www.intrum.co.uk/index.asp


First investment in Nobia

Summary

• Manufactures and sells complete kitchen

solutions

• Locations: Nordic countries, UK, Germany,

France and Austria

• Headquartered in Stockholm

• 8,500 employees

• CapMan PMF investment announced in March

2009

Investment rationale

• European kitchen market leader

• History of rapid expansion driven by intensive

M&A activity

• Lead consolidation and modernization of old-

fashioned and local kitchen industry

• Vertically integrated specialist with 28 brands

• 15 production facilities in seven countries

• Net sales CAGR 9% on group level since 2002,

no improvements in margins

Source: Nobia

1151

1442 14791537

0

500

1000

1500

2000

2005 2006 2007 2008

Net sales, M€

129

161

120

166

0

50

100

150

200

2005 2006 2007 2008

EBITDA, M€



Nobia

Trading performance

• Following strong trading in 2005–2006 Nobia

underperformed the market in 2007–2008

• Performance vs. index since investment

197%

• EV/EBITDA at entry 4.4x

• Current EV/EBITDA 13.0x

Ownership

• CapMan PMF fifth largest owner

• Two other active shareholders, both below

12% ownership

16

26

36

46

56

66

76

86

96

106

Jan-09 Apr-09 Jul-09 Sep-09

0

5

10

15

20

25

30

35

40

45

Nordic Mid Cap Index Nobia

Sources: Nobia, FactSet, (1) Stake as of 31 August 2009

Share price development

Largest shareholders

Shareholder % of shares

1 SäkI AB 11.2%

2 Swedbank Robur funds 9.1%

3 IF Skadeförsäkring AB 8.4%

4 Öresund, Investment AB 8.2%

5 CapMan Public Market Fund 7.7%

6 SEB Private Bank 7.6%

7 Nobia AB 4.7%

8 SSB CL Omnibus 3.7%


Contents

• CapMan Public Market in brief

• Market environment and deal flow

Value creation approach


Key success factors of private equity

Issue Success factors BenefitsApplicability to

public market

TimeDefined time horizon

Long termSense of urgency

FocusPerformance

Goal setting

Discipline

You get what you

measure

IncentivesManagement

Board

Alignment

Commitment

Resources

Committed Board

Strong General

Partner

Support for

management

Methods, tools

Leverage

Sufficient risk level

Efficient capital

structure

Optimal return


0 1 2 3 4 5 6 7 8 9 10

”Next election”

Closely held - ”From generation to another”

Public Market - ”Next year, next year,..”

Time horizons in different owner structures

Private Equity - ”Sense of urgency”

Government owned -

N

Years


Private equity approach - it’s as simple as that…

• Be active owner

– Select interesting industries (consolidation, growth)

– Identify value creation potential (growth, improvement, change)

– Create clear business plan and strategy

– Be innovative and think outside the box

• Set timetable for actions

– “Project” with pre-agreed timeframe (100 days, 1000 days…)

– Support flexible and fast decision-making

• Implement through proactive board work– Get the best available resources (management and board)

– Get the ecosystem to support your case

– Align interest with management through incentive structures (upside and downside potential)

• Agree on exit plan in advance

– Build a corporate governance model that qualify public standards

– Follow the plan and adjust fast if needed


Structured investment process

Value creation

& monitoring Exit

Selection

& evaluationEntry

Extensivenetworks

Confirmed value

creation agenda

Pro-active board work

Effective monitoring

Agreements & final decision

Share purchase

and/or issue

Selection of optimal timing

and method

Transaction

structure

Regular sparring sessions with management

Supporting

market

transactions

Communication & IR

Exit preparationQuantitative,

qualitative &

feasibility analysis

Value creation

agenda

Business

due diligence

Deal

sourcing

Short list/

portfolio

construction

Proactive origination

A3

A1

A2

Access to info

&

management

Capability

to recognise

Access via

market

entry

Appreciated by the

Board and managementCase

– key issues addressed

Thank you!

how capman public market fund brings private equity value...

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