Nordic Capital secures latest exit from 2018 continuation fund

The European buyout firm moved Sunrise Medical into a landmark €2.5bn multi-asset continuation vehicle six years ago.

Nordic Capital is set to make a 4x return on one of the assets housed within its 2018 multi-asset continuation fund.

The European buyout firm has agreed to sell assistive mobility company Sunrise Medical to Platinum Equity. Under Nordic’s ownership since 2015, Sunrise has grown to have a presence in 23 countries and revenue has almost doubled, according to a statement.

Nordic originally invested in Sunrise via its 2008-vintage Fund VII and moved the company into a multi-asset continuation vehicle in 2018. The 4x return relates to Nordic’s original investment in Sunrise, affiliate title Private Equity International reported on Wednesday.

It is unclear what the return was for continuation fund investors, which include Coller Capital and Goldman Sachs Asset Management, as Secondaries Investor reported in 2018. The €2.5 billion continuation fund contained nine assets held in the firm’s 2008-vintage Nordic Capital VII fund.

Nordic Capital VII performance
2008 vintage
IRR: 5.3%
TVPI: 1.36x

Data as of 30 September 2021
Source: Public Employees’ Retirement System of Nevada.
Private Equity International data

The exit is the latest from the vehicle, which also divested UK diagnostics business The Binding Site in 2022, making a 19x MOIC on its original 2011 investment. While that is not based on the return made for continuation fund investors, participants in the GP-led process still received a “very strong outcome,” one of the backers told Secondaries Investor at the time.

Increasing research about the performance of continuation funds is becoming available, driven by the market, which is keen to showcase the track record for these vehicles.

Research by Morgan Stanley took a set of 71 continuation funds of vintages between 2018 and 2023 and compared them against pools of returns data for secondaries and buyout vehicles. The data set comprised single-asset continuation vehicles (60 percent), with the remainder being multi-asset CVs.

The continuation funds delivered a median 1.4x multiple-on-invested-capital – on par with secondaries funds, and higher than buyout funds’ 1.2x median MOIC. The upper quartile of continuation funds slightly outperformed that of secondaries funds, with 1.7x versus 1.6x. They also outperformed buyout funds’ upper quartile of 1.5x.

Continuation funds’ potential outperformance was even more pronounced when it came to single-asset vehicles, with more than a 400-basis-point difference in outperformance between the upper quartile of single-asset funds versus multi-asset ones.

It is important to note that the returns in Morgan Stanley’s data set are largely unrealised, with roughly 85 percent of the MOIC remaining largely on paper.

Another recent study carried out by Evercore and the HEC School of Management in Paris showed single-asset continuation funds provide more consistency in returns than buyout funds and similar performance.

The report found single-asset continuation vehicles between the 2019-23 vintages achieved an average total value to paid-in ratio of 1.499x, closely aligned with the performance of 2019-vintage buyout funds, which generated an average TVPI of 1.513x. However, single-asset CVs have exhibited lower return dispersion than their buyout counterparts, indicating lower return variability.

Research from PJT Partners tracks the performance of a number of continuation fund exits. It shows five single-asset continuation funds have realised gross multiples of invested capital of between 1.8x and 3x to investors within those vehicles. A $500 million multi-asset continuation fund with an around three-year hold delivered an over 3x return, while a €250 million single-asset continuation fund with a similar hold period delivered a 4.5x return.