If it looks really challenging, it’s perfect
Nordic Capital case
Few adore a constantly disruptive environment as much as private equity firms. Embracing change and always aiming for sustainable solutions, these guys can turn turbulent times into gold mines in a heartbeat. Nordic Capital, one of the biggest private equity funds in the Nordics, has a particularly well-trained nose for fields undergoing massive change. When the financial crisis hit global markets in 2008, few would have expected to benefit from it. But for the investment-hungry fund managers at Nordic Capital, the new and disruptive environment turned out to be an eye-opener. Soon, they discovered a new favourite beat: the financial services industry.
Partner and Head of Financial Services, Advisor to Nordic Capital Funds
After being in an up-tempo job all week, Christian enjoys relaxing with his two best friends – his children – or play a round of golf during his time off. He also takes delight in a good stretch, more specifically yoga, which he practises as often as he can. By his turning 45, he aims to have successfully completed a yoga teacher education.
The charm of change
If you want to soft-soap a Nordic Capital partner, make sure to smile when you mention the word “change”. Nordic Capital, a private equity pioneer in the Nordic region, founded in 1989, has encompassed that word ever since the fund’s earliest days. “Nordic Capital really has a true passion for driving and supporting change in the industries it focuses on”, says Christian Frick, Partner and Head of Financial Services, Advisor to Nordic Capital Funds, of his employer. “Given the industry’s own ability to adapt to ever-changing circumstances, I think we embrace change. That’s why private equity also represents a very good governance model for companies that face not the same challenges, but the same challenging circumstances”.
Nordic Capital’s main pursuit is to find, invest in and build stronger businesses by helping their management accelerate growth and adjust to new circumstances. Companies that see change happening faster than their own ability to keep up are the main gems that the fund is hunting for.
Almost three decades ago, Nordic Capital started out as a local private equity fund in the Nordic region. With time, sweat and patience, it then grew to largely dominate the Financial Services and Technology Payments sectors in Europe. It also became a global top dog in Healthcare Investing. Today, Jersey-based Nordic Capital has advisory offices in all four Nordic countries and in the UK and Germany. It invests in five primary industry verticals: Healthcare, Financial Services, Technology & Payments, Consumer Retail and Industrial Goods & Services. Its current portfolio consists of about 30 companies with some EUR 10 billion in revenue and close to 50,000 employees. Always on the lookout for leveraged buyout transactions, Nordic Capital tirelessly scans the market for new investment opportunities. In recent years, Christian and his colleagues have found a new Eldorado: Financial Services.
A helpful crisis
Nordic Capital had taken more than one glimpse at the financial services industry before deciding to enter it. The private equity fund, super sensitive to good investment opportunities, knew deep inside that there was potential in financial services. Investments were made in the electronic payments solutions company Point International in 2004, and in the course of this ownership, it became evident to Nordic Capital that it had a lot to contribute with in the sector. But still, the Nordic Capital advisory investment team wasn’t completely able to crack the code in terms of their own role. Not until a major catastrophe hit.
In 2008, the financial crisis shook global markets like a high-scale earthquake. For Nordic Capital and many of its peers, it became quite the wake-up call. In the aftermath of the crisis, the effects that changing regulations, digitalisation and new customer behaviours had on the financial services industry became ever-more evident. Many financial services firms were confused and wondering how to adapt to the new environment. All of a sudden, Nordic Capital detected an entryway into the industry it hadn’t noticed before.
“That’s when we really saw that there was a role for us to play and what that role would be”, says Christian. “The global market for financial services is undergoing tremendous change and will require companies to meet those changes and act upon them, and that’s really our core expertise, to support them in such situations. So that’s why we see that there is a great opportunity for us to participate and support in that change”.
Oh the struggle
Nordic Capital isn’t a big fan of lingering. Naturally, the moment the decision was made to enter the financial services sector, the Nordic Capital team was ready to jump. The industry it was about to enter was, however, not as enthusiastic. Despite what Christian and his colleagues tried to say, private equity was by many simply not considered a good governance model for financial services. “We met a lot of those sceptics in the beginning”, says Christian. “I think, as we always do, we convince them one by one by simply delivering, or even over-delivering on our promises, and showing that Nordic Capital does actually deliver good value and supports the building of sustainably stronger companies”.
Christian soon learnt that his natural boldness very well could be played down a tad, and that he and his colleagues had to work on sharpening their focus instead. “We constantly try to stay focused on certain parts of that large industry because that really leads to increased understanding; you know where to look and what to look for, and it also gives you the courage to go after opportunities where others might only see challenges”, he says. “It’s difficult and probably also sometimes good not to be that bold before you have actually seen the results”.
With results at hand, however, one can say it was definitely worth the efforts. In 2012, Nordic Capital invested in Resurs Bank, two years later in Lindorff, and what subsequently became Bambora. In 2016, it invested in Nordnet, and in 2017 in MFEX and Nordax. These days, Nordic Capital is the biggest and most successful investor in financial services in the Nordic region.
Bang for the buck
Nordic Capital has certainly made a mark on the companies it has acquired. After buying consumer credits firm Resurs Bank, it supported the creation of what is today the leading independent consumer finance group in the Nordic countries. “And that was based on a much smaller platform, which today is about four times the size of what it was only five years ago”, says Christian.
Nordic Capital’s investment in online and in-app payments provider Bambora, he adds, is an even better, if not “fantastic”, example of the positive impact private equity funds can have on a business. “It wasn’t about changing existing business and making sort of incremental change, but really gathering many different companies and bringing the best out of them and creating something completely new in an established industry”. Bambora is today a pioneer in terms of challenging norms and standard ways of approaching payments.
In the case of online broker Nordnet, Nordic Capital has been completely aligned with the management team and the founding family, set on building the world’s best user experience in online savings. Currently, they are investing heavily to do so, and, as Christian says, “We strongly believe they will reach their targets”.
Finally, at credit management outsourcers Lindorff Group, Nordic Capital has been instrumental in supporting the firm in becoming the world’s largest debt collection firm, in particular by facilitating the merger of Lindorff and Intrum Justitia.
For Christian and Nordic Capital, the foray into financial services has for sure been an affirmative ride. “It’s a privilege to be able to work with really world-class people on a daily basis, which we have at Nordic Capital, and also to be able to support and cooperate with world-class board members and management teams”, says Christian. “A very positive experience has been the level of impact that Nordic Capital has been able to have on the companies, and the level of impact that those companies have been able to have on the industries in which they operate”.
It all just started
Although already a triumph, Christian says he believes Nordic Capital and private equity’s involvement in the financial services sector has only just begun. “My thesis is that private equity presence will increase, and given the way that we operate, I think this means that the level of change will increase as a result. With the size of the players in the industry, I think there is a natural tendency, almost like the law of gravity, for private equity to focus on challengers rather than incumbents. And again, given my belief in this, in what we do and how we operate, my money is on the challengers rather than the incumbents”, he says.
Christian, who himself bumped into the financial services sector quite by chance early in his career, has learnt to appreciate what he once considered a “devastating” business. Today, he calls his position an “extremely happy place”, and adds that he hopes to be part of the success as it blooms further.
“I think the beauty of this industry and what I really like about it is that it constantly changes, and this means that whatever plan I have made for myself doesn’t really mean anything. It really depends on what the industry brings. But if there is one thing that I would like to do, at least I hope that I will be able to continue building the best team in financial services within Nordic Capital. I think that’s really important for us to continue the success, and then we will see what happens to me”.