Nordic explores GP-led process on Fund VII – exclusive

Nordic Capital, a stalwart of the European private equity mid-market, has begun discussions with limited partners in its 2008-vintage fund about a potential secondaries transaction.

The Stockholm-headquartered buyout firm is working with advisor Campbell Lutyens to run a GP-led process on its €4.3 billion Nordic Capital VII fund, according to two sources familiar with the deal.

The transaction would involve moving the remaining 10 unlisted assets into a multi-year continuation vehicle which could have a five-year term, the sources said. These assets have a net asset value of around €2 billion.

Fund VII holds 15 assets, according to Nordic’s website, and it is understood that five of these are listed.

Nordic is exploring the process on its fund due to a difference in motivations in the vehicle’s LP base, according to one of the sources. Some LPs want to exit their investment as the fund has reached the end of its life, while others want to remain in the vehicle to keep their allocations up and allow more time to realise the remaining value in the portfolio, one of the sources said.

This is the second instance this week of a sizeable, established manager initiating a secondaries process on one of its funds. On Monday Secondaries Investor broke the news that Apax Partners, the UK’s second-largest private equity firm according to the PEI 300 ranking, had started a similar process, also advised by Campbell Lutyens. That deal involves selling assets in its €11.2 billion, 2007-vintage Apax Europe VII fund to a five-year continuation vehicle.

Nordic’s Fund VII was delivering a gross money multiple of 2x investors’ capital and a net internal rate of return of 9 percent as of 30 June, according to one of the sources.

Some limited partners in the fund have been consulted on the potential process, which is understood to be in “very early stages”. A buyer has yet to be identified.

Pension funds account for the majority of Fund VII’s LP base at 46 percent, followed by asset managers at 35 percent, life insurers at 13 percent and endowments at 6 percent, according to Nordic’s website.

The fund focuses on the Nordic region and Germany as well as making selected global investments. It targets a diverse range of industries with a special focus on healthcare.

Assets in Fund VII include Swedish credit management service provider Lindorff, Swedish disabled and elderly mobility solutions provider Sunrise Medical and Norwegian offshore energy service company Master Marine, according to Nordic’s website.

LPs in Fund VII include Pennsylvania Public School Employees’ Retirement System with a $100 million commitment, Washington State Investment Board with a $414 million commitment and Ireland Strategic Investment Fund with a €75 million commitment, according to PEI data.

Nordic is raising its ninth flagship fund and is understood to be nearing its original target of €3.5 billion. Both sources said that the prospective process on Fund VII would be unrelated to other fundraising activity.

Nordic Capital and Campbell Lutyens declined to comment.