In the first half of 2023, Finnish private equity investors have actively continued to invest in growth-oriented small and medium-sized enterprises (SMEs) despite a challenging market environment. According to a recent barometer survey, investors specializing in buyout and growth investments view the current market as difficult, but signs of improvement are on the horizon.
Data from the Finnish Private Equity and Venture Capital Association (FVCA) shows that these investors have poured a total of €452 million into established Finnish growth companies during the first half of 2023. Of this amount, €293 million came from Finnish investors, with the remaining €159 million contributed by international financiers.
Significant investments were made in 40 Finnish companies, including leading online auction house Huutokaupat.com, industrial maintenance and service specialist Elcoline, and infrastructure construction market leader Welado.
Despite the global trend of reduced foreign buyout and growth investments in Finnish companies, domestic private equity firms have been even more active than average.
Anne Horttanainen, CEO of FVCA, observes, "Our statistics clearly show that Finnish private equity investors are committed to investing in companies with growth potential, regardless of economic cycles."
However, the first half of the year was quieter in terms of fund-raising and exit activities. New funds for Finnish buyout and growth funds amounted to only €7 million, compared to an average of half a billion euros per year over the past decade. Exits have also been fewer than usual.
"There's still plenty of capital available for investment, as many Finnish investors had successfully raised new funds in 2021 and 2022 before the macroeconomic upheaval. However, the fundraising environment has been extremely challenging since then," comments Jonne Kuittinen, Deputy CEO of FVCA.
The market situation is expected to remain tough, but the previous uncertainty is dissipating. The barometer survey suggests that fund-raising, finding quality investment opportunities, and exiting investments are all perceived as more challenging compared to six months ago.
"The exits are crucial as they return the investment profits to the fund's investors, such as pension funds. The current difficulty in exits and fundraising is also observed across Europe," Kuittinen adds.
Horttanainen highlights the importance of maintaining a conducive domestic environment for private equity and removing obstacles to fund-raising.
Despite the ongoing challenges, the barometer results indicate a potential positive turn in the next six months. Juhana Kallio, Chair of the FVCA board and CEO of private equity firm Intera Partners, notes, "Although the market is expected to remain challenging, a clearer situation can positively influence activity. As buyers and sellers adjust to valuation levels over time, their perspectives are likely to align again."