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
0
50
100
150
200
250
300
350
400
450
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
4 CapMan Capital Markets seminar 2009 30 October 2009
CapMan Public Market in figures
0
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
5 CapMan Capital Markets seminar 2009 30 October 20095
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
Joined CapMan in 2008
Timo Peltola
B.Sc. (Econ.),
Dr. Of Economics (hc)
Advisor
Mikael MollM.Sc. (Econ)Investment Analyst
Formerly Merrill Lynch, UK
Joined CapMan in 2008
Joakim RubinM.Sc. (Eng.)Senior Partner
Former Head of Corporate
Finance, Handelsbanken
Joined CapMan in 2008
Raul Etelämäki
M.Sc. (Econ)
Investment Analyst
Formerly UBS, London
Joined CapMan in 2009
Karl Åberg
M.Sc. (Econ)
Investment Director
Formerly Handelsbanken
Joined CapMan in 2009
Teuvo Salminen
M.Sc. (Econ.),
certified public accountant
Advisor**
6 CapMan Capital Markets seminar 2009 30 October 2009
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
8 CapMan Capital Markets seminar 2009 30 October 2009
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
9 CapMan Capital Markets seminar 2009 30 October 2009
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
0
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?
10 CapMan Capital Markets seminar 2009 30 October 2009
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
11 CapMan Capital Markets seminar 2009 30 October 2009
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
12 CapMan Capital Markets seminar 2009 30 October 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
13 CapMan Capital Markets seminar 2009 30 October 2009
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€
14 CapMan Capital Markets seminar 2009 30 October 2009
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
16 CapMan Capital Markets seminar 2009 30 October 2009
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
17 CapMan Capital Markets seminar 2009 30 October 2009
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
18 CapMan Capital Markets seminar 2009 30 October 2009
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
19 CapMan Capital Markets seminar 2009 30 October 200919
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!