a tri-annual newsletter­ from Ik investment partners news issue­ 26 WINTER 2009

06 THE IK 20 SERIAL CONSOLIDATION AND COMEBACK 10 PANEL DISCUSSION IK STRATEGY AND OPERATIONS TEAM 12 EU DIRECTIVE REGULATORY CHALLENGE WELCOME VISTRA

PC NEWS 3 INSIDE IK 14 IKARE UPDATE 17 VIEWPOINT 18 IK NEWS ISSUE 26

CONTENTS EDITORIAL

Time for optimism and trust – welcome Vistra No one can describe the current economic environment as benign but conditions are better than they

Photo: Yann A rthus- B ertrand / ltitude. Photo: Yann were. Proof of IK’s growing optimism is highlighted by our investment in Vistra Group, a leading provider of corporate and trust services. We reveal why we invested and what we hope to achieve in Crossing borders, creating solutions. Anne Holm Rannaleet, a member of the European private equity task force – campaigning for fair and appropriate 04 regulation of the industry – explains in INVESTING IN VISTRA GROUP Regulatory challenge what the PAE is IK enters the growing sector of trust doing and why its work is essential for and corporate services. all industry stakeholders. Closer to home, we provide a candid, 10 no-holds barred description of IK’s IK STRATEGY AND THE CONSOLIDATION AND experiences between 2001 and 2009. OPERATIONS TEAM COMEBACK YEARS The article is the third in the series Meet IK’s change management This is the third and last article to ­celebrating our 20th birthday, covering experts and trouble shooters. 06 commemorate IK’s 20th anniversary. some of the most challenging years the Time to view the years 2001-2009. firm has been through so far. During the early 2000s, when life was particularly tough for IK, a strategy and operations team were set up, under business veteran Gerard de Geer. Find out more about the team in Change? Yes we can! This edition of IK News also includes pictures from our 20th birthday celebration, news about our portfolio companies, this year’s recipient of the IK Finnish American scholarship CELEBRATION and the views of IK partner, Helena 12 IK ­celebrated ­Stjernholm about prospects EU DIRECTIVE its 20th over the next few months. Engagement that makes a difference. anniversary in Meet Anne Holm Ranneleet, ­chairman London. Enjoy “ With the hope of good IK industrial advisory board and some pictures reading and a Merry ­member of the European private from this great Christmas!” equity task force. 15 event. ediTOR caMILLA TELANDER

NOTEBOOK

a tri-annual CALENDAR newsletter­ from news Ik investment partners news issue­ 26 WINTER 2009 Editor: Camilla Telander, 7 December [email protected] Assistant Editor: Jonas Rodny, Investor meeting, London 06 [email protected] THE IK 20 SERIAL CONSOLIDATION AND COMEBACK Texts: Anders Boye, Joanne Hart, 10 Anne Holm Rannaleet, PANEL DISCUSSION IK STRATEGY AND 8 December OPERATIONS TEAM Camilla Telander, Gustav Öhman 12 Production: Åkesson & Curry AB Industrial Advisory Board meeting, London EU DIRECTIVE REGULATORY CHALLENGE www.akessoncurry.com. www.ikinvest.com During December WELCOME © 2009 IK Investment Partners Ldt. All rights reserved. Neither 30 September 2009 Reports’ distributed to investors this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, VISTRA electronic, mechanical, photocopying­, recording or otherwise, PC NEWS 3 INSIDE IK 14 IKARE UPDATE 17 VIEWPOINT 18 without the prior per­mission of IK investment Partners. IK News is published three times a year by IK investment Partners, Brettenham House, Lancaster Place, London WC2E 7EN, UK. weblinks to portfolio companies www.attendo.se www.axtone.pl www.dynea.com www.etanco.fr www.europris.no www.flabeg.com www.idex-groupe.com www.kwintet.com www.magotteaux.be www.minimax.de www.moventas.com www.pasteur-cerba.com www.polytan.de www.schenckprocess.com www.sia-homefashion.com www.superfos.dk www.tradeka.fi www.vistra.com www.welzorg.com

2 – IK NEWS 3/09 PORTFOLIO COMPANY NEWS

NOTEWORTHY ADD-ON

Acquisition Wehkamp expands Leading Dutch online sales group RFS Holland acquired a majority stake in Create2Fit, another fast-growing online retail business specialising in telecoms, automotive and camping products. RFS Holland is the holding company for Wehkamp, the largest and most respected online store in the Nether- lands, and Lacent, the rapidly expanding online financial services business. IK acquired Wehkamp in January 2006, transforming sales Fire Protection growth from negative to positive while doubling operating profits. Last December, IK sold most of the retailer to a group New Minimax research centre of private investors, but retained a minority stake. Minimax, the leading European provider of fire protection technology has opened Create2Fit operates several specialist e-tailers, including a ­research centre at its Bad Oldesloe headquarters — the largest, most up-to-date Plasmadiscounter, Sneeuwkettingen and Barbequeshop. ­in-house fire protection test centre in Germany to help Minimax maintain and develop Joining RFS Holland provides growth opportunities and its highly regarded research capabilities. ­reasuring, founders Tom Coronel and Marc Koster will retain German Secretary of State for Trade and Industry, Karin Wiedermann, praised the shares, and stay on as managers. new site; “The Minimax fire research centre is an investment in the future,” she said. Wehkamp receives more than five million ‘hits’ a month and The centre offers several technical innovations, including a mobile suspended ceiling, ships around five million items a year. Lacent provides financial which can be used to lower ceiling height from 15 metres to two metres. This mobility services ranging from insurance to loans, credit analysis, and allows testers to simulate different enclosures, ranging from a small garage to a large database management. industrial warehouse. Minimax was acquired by IK Investment Partners in 2006 and is based in Schleswig- Holstein Germany. Their motto is; “It’s all on fire at our place so it won’t be on fire at yours.” Minimax is controlled by the IK2004 Fund. Visit www.minimax.de for more information.

Mechanical Drives Paper mill contract win Finnish power transmission specialist, Moventas, has won a contract in China, delivering equipment for a paper machine line supplied by global engineering group Metso. The contract solar ENERGY highlights Moventas’ broadening Flabeg opens in ­geographic focus. Moventas products and drive Pittsburgh solutions will be used across the paper Flabeg, the leading supplier of glass production line in the off-line coater, in products to the automotive and solar energy two winders, the paper machine dryer sectors, has just opened a new production and reel sections. The dryer includes a facility in Pittsburgh, USA. DRG drive concept specially developed The site will be used to make solar by Moventas for high-speed paper machines. ­mirrors, which help to generate electricity Prize at large-scale solar power plants. The $30 Under the contract, Moventas will million factory received 700,000 orders even manage the mechanical drive layout Superfos paint container awarded before it opened and Flabeg expects to and engineering to ensure smooth Copenhagen-based Superfos received a prestigious Scan- reach a capacity of a million mirrors annually. and ­effective operation of the power star prize for 2009 issued by the SPA (Scandinavian Packaging The Pittsburgh facility is particularly ­transmission equipment. The company Association) — Scandinavia’s highly respected packaging special special because it has been equipped to will also provide a mechanical drive interest organisation. The unanimous jury awarded the prize for produce tempered solar mirrors as well as spare parts package to Metso. Paintainer, a unique plastic container developed for paint com- the traditional, untempered variety. Moventas has more than 1300 bining the advantages of plastic with the appearance of metal. “We want to be fully prepared for any employees in eight countries around Paintainer won against 30 rival nominations based, on the possible changes in the law and we expect the globe. Moventas is controlled by the container’s user-friendliness, flexibility, ease if in opening and some federal states will introduce standards IK2004 Fund. Visit www.moventas.com closing (minimising spill) and visual appeal. for concentrated solar power applications. for more information. “We are very proud. This recognition shows our product Our core production will remain focused on development efforts are worth it. The Paintainer appearance fits untempered solar mirrors but, as always, the market’s preference for metal adding the benefits of plastic,” we like to keep abreast of the changing said communications manager Annette Gottsche. demands of the market,” says Flabeg chief Paintainer containers make less noise during production executive, Axel Buchholz. and are lighter for easier handling and transport. Straight sides Flabeg was founded in 1882 and is head- provide a large area for branding and decoration. “Paintainer quartered in Nuremburg, Germany and ope- suits tinting machines and comes in every colour,” says Annette. rates across the world through production The containers are leak-proof and rust-free. They do not dent, facilities in Europe, the Americas and Asia. scratch other surfaces on contact or require a tool to open. Flabeg in controlled by the IK2007 Fund. Superfos is controlled by the IK1997 Fund. Visit www.superfos.dk Visit www.flabeg.com for more information. for more information.

IK NEWS 3/09 – 3 NEW DEAL VISTRA

Trust and corporate services is a fast growing sector that is changing even ­faster. IK Investment Partners recently made its first foray in the industry, acquiring a majority stake in Vistra Group. CROSSING BORDERS, CREATING SOLUTIONS roviding corporate and trust services involves ­understanding, discretion and reliability. Clients, whether international ­corporations, wealthy individuals, or fund managers need to P know their business is being handled by professionals, who know what they are doing and will act to maximize efficiency and minimize fuss. In a fragmented industry where capabilities vary, many providers promise more than they deliver. Vistra is currently among the top 20 companies in the business worldwide. Founded just over three years ago, it has grown from employing only its four founders to having almost 250 staff — operating from 14 offices in Europe and Asia, serving clients across the world. The business was formed when the top management team from ­Fortis Intertrust bought the private client business of the Chiltern financial advisory group. Initially operating from London and Jersey, Vistra quickly expanded, both organically and by acquisition, opening service­ ­providers were ­facing ­intense problems, Vistra maintained new offices and purchasing complementary businesses. ­revenues and profits,” says Kristiaan Nieuwenburg, IK partner and head The firm now offers a full-range of solutions for corporate, financial of the Benelux investment team. and private clients including trustee and fiduciary services, corporate “The industry is not capital-intensive and the market is still quite services and fund services. ­fragmented, so there are good opportunities for consolidation, particularly considering the skills of Bart and the rest of the management team,” Chief executive Bart Deconinck, who held the same position Inter- he adds. trust, is ambitious and determined. “We want to be a top five player in our industry within the next three years. If you deliver decent client The meeting of minds between Vistra and IK reflects a fortunate service at a reasonable price, you can achieve good organic ­combination of events. The firms met when both were searching for growth. In addition, we want to continue to expand our acquisition opportunities. But Vistra was looking to acquire not be ­buy-and-build strategy,” he says. acquired. “IK was looking at this sector as we were following our growth Deconinck’s vision of the future fits IK Investment strategy. We bumped into each other, began to talk and quickly realised Partner’s ambitions in the trust and corporate services we had similar ideas about the industry. We feel very positive about our ­industry. IK began looking seriously at the sector two future with IK,” says Bart. years ago, attracted by the inherent strengths of the trust Prior to IK’s investment, Vistra was majority-owned by two ­private and corporate services business model. “In this investors. They sold their stakes to IK, while Bart and his ­management ­industry, you build long-term ­relationships team retained a sizeable minority interest in the business. with a wide variety of clients. This ­means “They have rolled over 80 per cent of their initial investment and your income stream is protected to a certain are keeping the rest so they can participate in future acquisitions. ­This extent. Even last year, when many ­financial provided important comfort for the deal. The human resources are key

“We want to be a top five player in our industry within the next three years. If you deliver decent client service at a reasonable price, you can achieve good organic growth. In addition, we want to continue to expand our buy-and-build strategy.” bart deconinck, chief executive, vistra Kristiaan explains; “We believe the sector will be subject to change in terms of compliance, legal and tax issues, and client handling. This should be good for Vistra and other top quality companies. As the ­industry develops, the strong are likely to get stronger and the weak may find the environment increasingly challenging.” IK has not directly operated in this field before, but it has many years experience in financial services, as well as with­international

Photo: Yann Arthus-Bertrand / Altitude. Photo: Yann M&A. “We think IK will be able to help us move to the next stage of our ­development. Their resources and their international reach will help propel us into a top five position,” remarks Bart.

The Vistra deal was financed primarily by equity from IK, with existing management providing additional investment. “We did not leverage the business much since we plan to make acquisitions over the next couple of years. We therefore did not want to have a rigid and ­expensive financial structure in place right now,” says Kristiaan. Vistra has a blue-chip client base ranging from individuals with assets of €5 million to Fortune 500 corporations. Acquisitions are likely to focus on areas of the world where Vistra is under-represented, as well as fund services.

assets in a business like this, so it is imperative that key people are fully “Their world is becoming highly regulated. Taxation laws and aligned,” says Kristiaan. ­compliance requirements are changing continuously and it is Bart certainly agrees that relationships are intrinsic to the business. ­increasingly important for companies, financial institutions, and “We’re like an old-fashioned partnership. Everyone is involved with individuals to be able to put their trust in the professionals involved in clients at every level of the business,” he explains. managing their ­financial affairs. Bart and his team are young, dynamic and work to a very high standard,” says Kristiaan. Trust and corporate services encompasses a wide range of offerings. Vistra has grown rapidly over the past three years but the next few For corporations and financial clients, Vistra helps to set to up and ­years should see continued rapid growth. The trust and corporate ­administer holding companies, and provides ­company secretary services, ­services industry is becoming more international and more ­professional book-­keeping and account management. in response to clients’ needs and regulatory demands. Vistra is For example; “If a US company wants to invest in Poland, it might be well placed to take advantage of these trends. ­Independent, advantageous to set up a holding company in Luxembourg or somewhere multi-jurisdictional and totally focused on clients’ similar, to avoid pitfalls such as double taxation,” Bart explains. needs, the firm has built its business by maintaining an For wealthy individuals, Vistra acts as a trustee and helps clients in-depth understanding of the environment in which ­structure their assets effectively. “Wealthy individuals who own pro- it operates, and the often complex requirements of the perty in a variety of jurisdictions should ensure their affairs are being companies and individuals with whom it works. properly administrated and looked after,” says Kristiaan. “Combining our entrepreneurial background and The world of trust and corporate services is currently in flux. In recent knowledge of the industry with IK Investment years it has come under scrutiny from regulators and tax authorities, who Partners institutional and global perspective are mostly concerned with ensuring companies operating in this field are should create a win-win situation for us, for bona fide. But IK believes this focus on the industry will benefit Vistra. them and for our clients,” Bart concludes.

“Wealthy individuals who own property in a variety of jurisdictions should ­ensure their affairs are being properly administered and looked after.” kristiaan nieuwenburg, partner, ik

XXXX20 YEARS XXXX OF IK – PART 3 OF 3 2001–2009: CONSOLIDATION and COMEBACK

IK News has already looked at IK Investment Partners from 1989 to 2001 — following the firm from when it first started into the expansion years of the mid 90s. In 2001, however, several portfolio companies were facing performance issues. When IK tried to raise a new fund, investors were reluctant to commit. The firm’s ability to recover from those dark days holds valuable lessons for many private equity firms facing similar problems today.

hen the dotcom bubble burst in the investment had been written down to below 2001, many countries plunged into 0.8x. “Even that could have been questioned since ­recession and by late 2001 several profit trends were negative the entire period,” W of IK’s 25 portfolio­ companies were ­relates James Yates, IK finance director, who ­experiencing operational or financial difficulties, ­coordinates portfolio company valuations. or both. We set up a team to review operations, Received wisdom in the PE industry is that ­strategy and business control to help the firm and its investments that do not do well in the first year portfolio companies manage their problems. Gerard do not do well at all, but everyone involved with De Geer was recruited from management ­consulting MacGregor worked hard to disprove this. Hans firm A.T. Kearney to head this team. Pettersson, a division head, was promoted to CEO and quickly moved the head office. “We needed to Operations group – born from crisis move to our customers in Asia. We had to expand When Gerard joined IK, he hit the ground running. there while cutting down in Europe. This is another “My group of three quickly had to prioritise how thing the textbooks tell you require care, but Hans we spent our time. We had to focus on diagnosis and his team made it work,” explains Gerard. and leave implementation to the managers, assisted MacGregor was sold to Cargotec in 2005,­ by outside resources where needed,” he recalls. ­returning 2.3x to IK’s investors; threefold value The group still exists today with an a­dded “My group of three quickly improvement in two years. ­important role. It provides an operational had to prioritise­ how we ­perspective and a highly valued second opinion Exit, exit, exit – good returns when IK is considering additional investments in spent our time. We had By 2001/02 the firm had invested almost €2.5 portfolio companies. The team studies business to focus on diagnosis and ­billion through the IK1997 Fund and IK2000 plans for these follow-on investments, giving an leave implementation to Fund ­without delivering cash to investors. Before ­objective opinion, so an in-house team is essential. marketing any new fund, the challenge was clear IK managing partner, Detlef Dinsel, ­explains; the managers, assisted by — return cash before asking for more money. This “The most important contribution of the ­outside ­resources where shifted focus to completing exits. At that time, ­operations team has been to give us methods, needed.” trade and financial buyers were cutting back on ­processes and structure in our turn-around gerard de geer, partner, ik investment, and recaps were still unheard of, so IK ­analyses. Often circumstances force decisions on went to the local Nordic stock markets for liquidity. what must be done before signs of improvement ­appear, but you can be “We probably ­forced the IPO window to reopen in Sweden in 2002. And much more cost-effective if your vision is clear.” it wasn’t easy,” remembers Björn Savén, IK chairman. The group does more than just trouble-shooting. It has also In 2002, IK managed three out of the four private equity-backed ­improved operational knowledge, methods and thinking both in IK IPOs in Sweden, listing Alfa Laval, Nobia and Intrum Justitia. Oriflame and its portfolio­ companies. Working both directly and indirectly with followed in 2003. “Many institutions wanted an immediate uptick ­portfolio companies, it also holds regular BPX (Best Practice eXchange) on these IPOs while IK wanted the best price for its fund investors. seminars for all top executives. The pricing tension spilled over into the Swedish business press and ­resulted in some pretty wild coverage. However, these companies MacGregor – from ugly duckling to swan have all done very well since,” says Arvid Carlsen, a senior corporate An example of the strategy and operations team’s work is MacGregor, who ­financier at Enskilda Securities at the time. specialises in optimising maritime cargo flow. IK acquired MacGregor Björn admits; “With the benefit of hindsight, we should have in 1997 planning to develop the service side of business. Four years later, prepared ourselves and our portfolio companies better for the media

6 – IK NEWS 3/09

20 YEARS OF IK – PART 3 OF 3 XXXX XXXX

MCGREGOR “These days, most critical IR work is actually done between formal Photo: Plainpicture / Folio Photo: Plainpicture fundraising rounds and we are now geared to respond to most requests at any time.” mads ryum larsen, partner, ik

onslaught that comes with an IPO.” But fund investors were happy with the results: money ­multiples ranged from 1.9x on Alfa Laval to 6.6x on ­Oriflame and 7.7x on Nobia. Raising the IK2004 Fund – when you’re hot, you’re hot but … Investors were slow to commit and our exit ­proceeds arrived too late to show any ­momentum as IK raised new funds for 2004. The only way to break this cycle was for ­individual investors to go against the pack. Here, ­Pantheon Ventures were important, ­since they were ready to increase their ­previous ­commitment. And, they were the ­largest ­investor in the IK2004 Fund by first closing. As Colin Wimsett,­ managing partner at ­Pantheon Ventures relates “When we committed in 2003, it was a very contrarian move. Sentiment had turned negative­ towards IK and a few other funds. But we looked at facts rather than ­rumours and have not regretted our decision”. BJÖRN SAVÉN The IK2004 Fund finally reached €825 million, ALFA LAVAL ORIFLAME EXECUTIVE CHAIRMAN, IK less than half the IK2000 Fund (€2.1 billion). “Many investors asked themselves how we would cope managing a smaller fund. ­Ironically, this has become a major theme in the PE ­industry today. I could spend all my time ­relating our earlier­ experiences,” says Mads Ryum Larsen, who became IK’s IR partner­ in 2004. “But it should be noted there is no clear cor- relation ­between size and profits. IK1994 Fund was just a third the size of the IK1997 Fund but has ­generated as much profit in absolute terms thanks to its stellar performance. In a few years’ time we will know whether the same is true of IK2000 Fund and IK2004 Fund,” he continues. After the IK2004 Fund – rebuilding investor relations NOBIA Until 2004, IK had been in fundraising mode every three to four years. Senior partners ­toured Europe and North America, with ­placement agents in tow, but the task of ­preparing and ­coordinating everything often went to the youngest IK partner, a new one for every fund.

Photo: Plainpicture / Folio Photo: Plainpicture As Mads explains; “This ­approach overlooked the fact that investors had started to do ­due-­diligence in between fundraising when IK was not organised to meet with and listen to them. These days, most critical IR work is ­actually done between formal ­fundraising rounds.” ­Investors also ask for more ­information in their due diligence, including portfolio ­company information and performance ­statistics cut in many ways. “These days we are geared JAMES YATES to respond to most requests at any time, while FINANCE ­before, complex data requests simply had to wait DIRECTOR, IK INTRUM JUSTITIA for us to process them,” says James Yates.

IK NEWS 3/09 – 7

XXXX20 YEARS XXXX OF IK – PART 3 OF 3

A close-knit team DSI – buy-and-build IK had 35 investment professionals in 2002, Over the last five years, creating value has shifted ­growing from 15 in five years. That number is from a focus on ­improving internal profit through still 35. All the partners promoted since (half the such ­measures as cost reduction, to external ­current total), came up to replace partners who measures like ‘buy-and-build’ — buying smaller have retired or left the firm. Helena Stjernholm competitors to integrate into a single larger busi- ­joined IK as an ­associate in 1998, becoming ­partner ness. This strategy became ­attractive when banks in 2007. She comments, “downturns are not began providing special acquisition facilities pleasant, but our ­experiences early in this decade allowing nearly full debt ­financing, for the smaller certainly help us deal with the challenges we face ­add-ons at least. IK ­executed this strategy with today. As a firm, I believe therelatively ­ rough ride DSI, a worldwide ­provider of solutions for the we had last time has prepared us as well as possible mining and ­infrastructure industry. for today’s environment.” “DSI completed 15 acquisitions in less than Chris Masek, managing partner, agrees; “People two years, all entirely debt financed. This worked I know in other organisations where ‘the party’s thanks to the capital and strategic ­discipline over’ message is being heard for the first time are ­imposed, and DSI’s corporate culture that having a much tougher time.” “Downturns are not pleasant, ­assimilated new managers to keep them on board. This ­substantially reduced the risk ­inherent in each CEVA – investing in a downturn but our experiences early in move. The achievement from senior ­management In 2003, IK Investment Partners made a single this decade certainly help us was amazing, in particular general manager Eric new investment — CEVA Santé Animale, a French van Lammeren,” relates Detlef Dinsel. specialist in animal health products. Chris was deal with the challenges we DSI is one of IK’s best investments ever, ­responsible for this. He explains, “because our face today.” with ­nearly 12 times return in two years and a French deal team had not had any pre-crisis helena stjernholm, partner, ik ­three-figure IRR. ­portfolio companies, it was easier to stay focused on new opportunities. I believe you should always be looking for good Raising the IK2007 Fund – redemption deals. If you believe you can accurately call the cycle and time your IK had refurbished IR and succeeded in several deals. Now it was time moves in and out of an ­illiquid market, why waste your time in private to test the firm’s reputation in fundraising. Many partners were worried equity? Run a hedge fund instead!” since investors seemed drawn to mega funds or ­geographical funds. 2003 was the low point in the cycle and this turned into an ­excellent But, many IK2004 Fund investors ­recommitted for more and previous opportunity to buy. But IK, like the entire PE industry invested investors returned. Many new ­accounts also ­committed, quickly filling ­relatively little then. Today, this pattern seems set to be repeating itself. the offering. Why? “Few companies look good over any three year period, when you Mads Ryum Larsen laughs, likening his job to a nightclub doorman. are two years into a downturn. And even fewer buyers are prepared “Investors are short-staffed for processing approvals and completing to give the seller credit for value — in profits and multiples — looking paperwork, so they tend to postpone this work when they don’t risk forward to the inevitable recovery,” explains IK managing partner losing the opportunity of a fund becoming oversubscribed. My job Michael Rosenlew. is to keep the queue short; making sure everyone feels fairly treated. Recently, I have even been able to give secondary opportunities to most Wehkamp – returning to familiar territory people who missed the IK2007 Fund, which is rewarding.” In 2005 IK returned to familiar territory, when it backed the ­management buyout of Wehkamp, a Dutch home shopping company, Good timing this time and its associated consumer finance and credit management arms. Learning from mistakes is key. “With our cash exit to investment ratio Wehkamp was quite a complicated business, a large part of which above 3:1; all current funds with positive cash-on-cash returns; and a was in decline. large new fund only 25 percent invested, we seemed better off in 2007, “Wehkamp is an excellent example of what building on your earlier compared to what we got wrong in 2002/03,” says Björn Savén. industry knowledge combined with active ownership can achieve. This was not merely good luck. IK’s partners were determined to In this case we were able to draw on experiences from our investments avoid repeating the difficulties resulting from the unfortunate timing in in Ellos, Intrum Justitia and the consumer finance activities of Danish the 2001-03 downturn. They improved structures for quarterly review retailer Fona. This enabled us, together with management, to transform of portfolio performance, which created a new dynamic. the business into the market leader in online retail in the Netherlands “Previously, we were perhaps less disciplined in moving companies and develop both a high-growth consumer finance and credit manage- out the door when they were ready. But, we always have lively debates ment operation,” says IK and Benelux Partner Kristiaan Nieuwenburg. when deciding to sell or hold,” comments Chris Masek. IK realised part of its investment with the sale of the credit As a result IK returned record amounts to fund investors in 2005, ­management activities in 2007, which had grown substantially since 2006 and 2007. The Prevesta and DSI exits received specific awards. acquisition. IK successfully exited Wehkamp after the sale of an 80 percent stake in the business in late 2008, which secured a 5x return on Debt availability procyclical the investment. The deal was nominated for European exit of the year. Fluctuation in lending multiples is a key factor in PE cycles. DSI and

INVESTMENTS AND EXITS DURING THE PERIOD

Investments: Prevesta/Myresjöhus, Investments: Dataphone, The SIA Group, Kid Interiør, Suomen Perstorp, Groupe Fives-Lille, Eltel Investments: Labeyrie, Lähikauppa Oy, DSI, Consolis, Kwintet. Networks, Sydsvenska Kemi. Gardena, Welzorg. Investments: Investments: Europris, Idex. Exits: Sydsvenska Kemi, Dyno Nobel, Exits: Kongsberg Automotive, Exits: Alfa Laval, Intrum CEVA Santé Animale. Exits: Groupe Fives-Lille, Laho Equipement, Fortex, MacGREGOR, i-center, Noviant, Amas, Guldfynd. Justitia, Nobia. Exits: Paroc. Labeyrie, Oriflame. Arca Systems, Consolis.

2001 2002 2003 2004 2005 2006

8 – IK NEWS 3/09

20 YEARS OF IK – PART 3 OF 3 XXXX XXXX

DSI ­Alfa Laval illustrate how changes in valua- tion multiples from entry to exit significantly affect outcomes. Both companies improved Photo: Sime / Folio ­operating profits substantially, so should have ­generated very high returns had they been sold at the same multiple as at entry. For Alfa Laval, however, valuation at exit was less than 9 times EBITDA, compared to nearly 13 at entry. For DSI, the shift was the other way: the difference between what MICHAEL IK borrowed in 2005 and what banks were ROSENLEW, MANAGING ­willing to lend to new owners in mid 2007 DIRECTOR, IK was more than four multiple points. But, most PE funds currently experience the opposite phenomenon and have to spend significant time and money just to keep such investments afloat. Still, those who manage to continue adding value through the crisis will be able to show positive results over time. Alfa Laval (acquired 2000; exit ­2002-04), delivered twice the invested equity to WEHKAMP ­investors despite the shift in valuation ­multiples. “We nearly tripled operating mar- gins through a tough operational excellence­ ­programme, adding significant value. ­Otherwise, we would have had to stay in CEVA SANTÉ ANIMALE longer for similar results — or more likely, had a less favourable outcome,” ­comments Björn. IK – what is in a name? To close our history series, we reflect on our brand and identity. This isn’t a ­priority in an industry where groups often use their founders’ names — IK would have been SMW Capital in 1993. But, Björn had a different idea. “We didn’t want our names on the door, but rather prioritized a solid, almost boring ­image. The name Industri Kapital made ALFA LAVAL people ask if we worked for the ­government,” he laughs. But a good name for a Nordic firm in 1993 when larger investments focused on ­manufacturers, needed to change 15 years ­later. Half our business lay outside the ­Nordic region and a lot of manufacturing was KRISTIAAN moving to Eastern Europe and Asia. We had NIEUWENBURG, broadened ­ownership from three ­founders PARTNER, IK to ­thirteen partners, and we needed to ­communicate this ­partnership structure. Other firms have changed their name more dramatically this last decade, but IK bucked the trend again. Chris Masek explains; “Others changed names because they had to. They became independent, just like we did in 1993. But our brand was well known and many knew us MADS RYUM simply as IK. I believe we made an excellent LARSEN, choice keeping our initials in the logo but PARTNER, IK changing our name.” As 2009 draws to a close we see signs of recovery. Next year will probably be tough but

Investments: Wehkamp, less so than last. At IK, we feel well equipped Sport Group, Minimax, Investments: Attendo, Magotteaux, to face the future. We have learnt invaluable Group Cerba, ELFA. Moventas, Schenck Process. Investments: Etanco, Exits: Enermet Group, Exits: Consolis, DSI, CEVA Santé Flabeg, Axtone. lessons in our 20 years, and we are ready to F Group, VSM Group, Animale, Gardena, Eltel Networks, Exits: ELFA, Wehkamp, Investments: Vistra Group. move into the next decade doing what we

Continental Bakeries. Elektrokoppar, Prevesta/Myresjöhus. Dataphone, CPS Color. Exits: Kid Interiør. do best – finding good ­businesses, helping them grow into excellent businesses, and 2006 2007 2008 2009 2010 ­generating robust returns for our investors.

IK NEWS 3/09 – 9 PANEL DISCUSSION – STRATEGY AND OPERATIONS TEAM

Change? YES WE CAN! IK News met with the strategy and operations team to talk about their key role in IK’s value creation strategy.

artner Gerard De Geer, leads the IK investment Partners according to plan or when it faces a challenging change agenda. We strategy and operations team. Along with team members then develop a detailed understanding of the business issues involved to Ursula Schweighart and Daniel Mogerud, he met IK News to help assess the measures needed. We can help the managers prioritize P discuss their role as change management experts and trouble these actions and track developments during implementation. shooters who leverage the firm’s extensive network of experienced Give us an example of a situation where your team played a industrial leaders. crucial role. Describe the strategy and operations team’s role. gerard – I would suggest that all the work we do helps enhance value gerard – Put simply, we are the in-house advisory service that acts at our portfolio companies, but a specific example from a couple of as a sounding board for IK deal teams, years ago is when we were involved in managing the turnaround at when ever our expertise is requested. ­Superfos, which produce plastic containers. The company ­previously We ­specialise in identifying potential had a strong market position but was weakening as it struggled with “Put simply, ­inefficiencies and in managing change for several new issues. We helped the company’s board and management IK portfolio companies. The IK deal teams prioritize their action programme me to restructure the organization we are the always ­formulate a value creation strategy towards a solid platform for future growth. In addition we changed in-house ad- during their pre-acquisition due diligence and reinforced the management of the company. visory service process and in most cases the strategy Describe the relationship you have with management teams at is successfully implemented. But when portfolio companies. that acts as things don’t work out, our experience and gerard – Our relationships with managers at portfolio companies are sounding board expertise can be brought in to ensure that excellent. Everyone in the team has operational backgrounds, so we the original strategy is put back on track as speak the same language as they do. for IK deal quickly and smoothly as possible. ursula – Our deal teams also have a very good relationship with teams when daniel – Often, we are parachuted in to portfolio company management, also. We often complement that by our expertise is help resolve specific situations, but we also linking management and board, maintaining the owners’ objectives take a proactive approach and work with while understanding what is achievable and when. requested.” portfolio companies to ensure that ­issues daniel – It’s not uncommon that managers independently ask us for gerard de geer, are identified and dealt with early. advice on a particular aspect of their business – which also testifies to partner, ik What are your responsibilities in relation the good relationships we have with them. to IK’s investment teams? Your group is also responsible for IK’s industrial network. gerard – Our main responsibility is to help What is that? the investment teams create value by being their sparring partner. gerard – We have some 40 advisors with in-depth industrial We help identify issues that immediately affect the portfolio, and ­expertise to provide investment advice for acquisitions and in difficult those which are waiting round the corner. We also assist the invest- situations. They often sit on portfolio company supervisory boards. ment team identify and understand value creation opportunities. This network is a highly valuable resource since it allows us to draw ursula – Deal teams generally have overall responsibility for defining on their extensive knowledge and experience, irrespective of ­industry goals for each portfolio company. Sometimes we help them translate or geographical area. We can even, and frequently do, appoint these goals into realistic plans that can be implemented. Our competen- ­members of the network as interim managers or consultants when cies complement each other very well. Deal teams are typically more needed in a change implementation process. financially oriented while our team provides industrial insight and ursula – IK also hosts regional conferences and seminars for our operational expertise and experience. ­industrial network, where they interact with our investment teams Describe a typical situation where a deal team, the board or the and portfolio company management. This provides a unique and ­management ask for your advice. ­valuable opportunity for cross-fertilization of ideas and experiences. gerard – They generally look to us when a company is not developing gerard – Within the network, IK also has a dozen senior advisors

10 – IK NEWS 3/09 with ­extensive senior management ­experience and in-depth industry GERARD DE GEER, “To some expertise who work exclusively for us. PARTNER The senior ­advisors, in addition to being Joined IK in 2001. extent the on ­supervisory boards and advising on Previously worked as vice financial crisis transactions and ­restructuring ­activities, president at A.T. Kearney in has made our provide guidance for IK’s overall Stockholm. ­strategy. Spent 19 years in general work easier as People and relationships or facts and management positions in the companies are figures – what are the most important manufacturing industry. more willing skills needed in the strategy and Holds an MBA from Harvard ­operations team? Business School and a MSc. to accept that ursula – Both are equally important. in Economics and Business Administration from Stockholm Understanding a portfolio company’s they have to School of Economics. performance figures, financial targets, adapt and em- market data and so forth is ­essential. brace change But there’s no use devising a great ­improvement plan if you don’t have the in the face of skills to motivate and support people to DANIEL MOGERUD, an economic ­implement it. MANAGER downturn.” daniel – Facts and figures are ­multi-dimensional. They are linked Joined IK in 2009. ursula schweighart, portfolio and operations to a timeline and are there because Previously worked with controller, ik of ­operational actions carried out by ­operational excellence at SEB people. This chain of cause and effect is in Stockholm, in corporate important to grasp both holistically and development at Orkla, and as in detail. While a target can be expressed as a figure and a time, it is a manager at A.T. Kearney. people who achieve that target. Holds a MSc. in Industrial Engineering and Management How has the financial crisis impacted your work? from the Linköping Institute of gerard – The fundamentals of how we work have not changed. Technology. But the current financial climate has in many cases made our ­advice more urgent and necessary. ursula – Implementing and managing change has always been a significant part of our day to day business. I would say that the ­financial crisis has made that part of our work easier, to some ­extent, since companies show greater willingness to accept the need to adapt and embrace change in the face of an economic downturn. URSULA SCHWEIGHART, What is the advantage of having in-house expertise like the PORTFOLIO AND OPERA­ ­strategy and operations team – compared to using external TIONS CONTROLLER ­consultants? gerard – Well it’s not either or, it’s both. We hire external Consultant at IK since 2009.

­consultants when we need their expertise or capacity on a specific Previously built her ­independent strategy issue. However, what the strategy and operations team especially consultancy engaging with brings to the table is an in-depth understanding of every company international corporations, and as a result of our long-term relationships. We know the ins and outs before that worked as case of our portfolio companies and can also manager at the management respond quickly when needed. consultancy Arthur D. Little. daniel – I think that having the strategy Holds a MSc. in Economics “In the current­ and operations team is a real competitive and Business Administration advantage for IK, particularly when com- from Karl-Franzens-Universität markets, I pared to our mid-market competitors. in Graz, Austria and has also studied at Harvard University. think that The financial crisis has remodelled ­having the the PE industry. What does this entail for IK? strategy and gerard – Limited access to leverage CHRISTEL RETZLAFF, operations has led PE firms that usually focus on PORTFOLIO AND OPERA­ financial restructuring to look more for TIONS CONTROLLER, ­CURRENTLY ON MATERNITY team is a real operational expertise and ­improvements. LEAVE competitive From our perspective though, we advantage ­continue to see opportunities arise in Joined IK in 2000. the form of companies with good growth Previously worked in corporate for IK.” prospects. finance at Pricewaterhouse­ daniel mogerud, Given IK’s unrivalled operational Coopers and prior to that at manager, ik ­expertise and the experience ­acquired Daimler Benz AG responsible over the past 20 years, I believe we for a risk management project. are well positioned to take advantage of upcoming investment Holds a Msc. in Economics and ­opportunities. As one of our investors recently put it; “IK has Business Administration from Stockholm School of Econo- something pretty unique in terms of capabilities. It really makes a mics and a CEMS Masters. difference.”

IK NEWS 3/09 – 11 EU DIRECTIVE

The private equity industry has come under intense ­scrutiny over the last ­years and greater regulation now seems certain. The key ­question is: what form will that regulation take? Anne Holm Rannaleet, chairman of the IK industrial ­advisory board (IAB) and a former partner of the firm, is amember ­ of the European ­private equity task force, campaigning for fair regulation of the industry on behalf of all European private equity firms. Regulatory challenge How did you become involved with this incredible number of reports and documents work. The PAE has weekly phone calls and ­regulatory work? describing how our industry works and creates. meets physically once a month. We also have It became clear last autumn that political We have also compiled numerous technical regular meetings with the broader group of all pressures made the regulation of the Euro- documents describing every aspect of the national associations, known as the Representa­ pean private equity industry unavoidable. So industry and our relationship with ­investors tive Group. Educational round tables with the industry came together and set up a small and portfolio companies. This work has been policy makers are organised on a regular basis task force to represent its interests in dialogue done in response to various requests from the in Brussels and other capital cities, bringing with policy makers. We had to ensure we were European Commission, Council members, together practitioners, portfolio companies and speaking with one voice, acting as one body the Presidency and members of the European investors. We also speak regularly to represen- and delivering coherent messages. I was asked ­Parliament. As an industry we are ­faced with tatives from the various EU finance ministries to ­represent the mid-market and the Nordic two huge challenges: educating policy makers and national regulators, as well as other policy region in this task force. about how private equity really works and makers, to answer queries they may have or Who else is on the task force? ­lobbying the relevant authorities to ensure that provide them with material they require. The task force started out as a tempo- the regulatory outcome in relation to private What do you expect to happen in the end? rary organisation­ but, following an EVCA equity is appropriate, proportionate and fair. We already know there will be regulation of ­governance review, it evolved over the past year How do you deal with these twin challenges? the alternative investment sector. That in itself into a more institutionalised body known as Through co-ordinated effort and a lot of hard is not something the industry opposes. We are the Public Affairs Executive (PAE). Working already regulated in several parts of Europe under the EVCA umbrella, the PAE represents and have no objections to sharing information all the national private equity associations and with regulators; nor do we oppose transparency EVCA members. It is chaired by the EVCA with regard to our investors. Private equity chairman, currently Jonathan Russell of 3i, investors already receive more detail about to be succeeded by Richard Wilson of Apax their PE investments than their investments in during November. The large buy-out segment the public markets. is ­represented by Vincenzo Morelli of TPG and So what is the problem? the venture segment is represented by Uli Fricke The problem is that the Directive was originally of Triangle Venture Capital Group. The three largest national associations have one seat each and there is a rotating seat for the country that holds the EU Presidency. So ­currently we have “In the past 12 months, we Marie Reinius of SVCA, Simon Walker of the have produced an incredible­ BVCA and Dörte Höppner of BVK. Jean-Paul Bernadini has just succeeded Pierre de Fouquet number of reports and as the AFIC representative. In addition the Spa- ­documents describing ­how nish association, ASCRI, attends representing the incoming Presidency country. our industry works and ANNE HOLM RANNALEET, What exactly does this group do? CHAIRMAN, IAB ­creates value.” In the past 12 months, we have produced an anne holm rannaleet, chairman, iab

12 – IK NEWS 3/09 aimed at traded funds (like hedge funds); it was put together in haste, without customary Voices on the Directive consultation, and private equity was thrown in at the last minute. So, when it is applied to pri- “Private equity is an important contributor to “It is not private equity that caused the crisis, nor vate equity, some of the provisions as ­currently ­European competitiveness, particularly in financing hedge funds. But in some countries, the political worded (capital requirements, ­valuator, and supporting SMEs, as a driver of innovation and debate portrays private equity and hedge funds as ­depositor and public disclosure) distort as a cornerstone of European pension returns.” the problem.” competition and create extra administration “To that end, we need regulation that provides a level “That’s not the same as saying we shouldn’t regulate and increased costs for investors and portfolio playing field for all European companies – whether them. But the aim is to have sound regulation and companies, without any additional benefits private equity – backed or not – and that will not to kill the industry.” for either party. These funds could be put to ensure that our industry can play an optimal role in Mats Odell, Sweden’s financial markets minister better use in portfolio investments, especially helping ­Europe recover from the downturn and fuel ­sustainable economic growth.” when capital is in short supply. The ­Directive is “Investor choice will disappear because under the Javier Echarri, EVCA secretary-general particularly negative for the venture, growth, Directive investors can only choose EU managers, expansion and smaller buy-out end of the indu- EU prime brokers, EU custodians and other EU stry – which actually constitute the majority of “The notion of a one-off cost to private equity and service providers if they want to invest in funds the approximately 1,700 firms active in Europe. venture capital combined of €800 million and based in the EU.” What do investors feel about it? ongoing costs of €280 million is simply shocking.­ It will make Europe a ­relatively ­unattractive location Douglas Shaw, head of alternative investments at They are very concerned, especially with the in which to conduct private­ equity or venture capital BlackRock Inc third country provisions. If these provisions business. It will drive investments­ elsewhere and, are enforced, investors will not be able to as the report ­acknowledges, would have a highly “It would be foolish not to discuss the issues with all invest funds with managers based outside ­detrimental effect on employment prospects.” players. We do not want unintended consequences. the EU, effectively making it impossible for So the answer to your question about an impact Simon Walker, chief executive of the British Private­ assessment is, yes” them to diversify beyond Europe. Investors Equity and Venture Capital Association need to be assured of tax transparency on Poul Nyrup Rasmussen, the driving force behind their ­investments, hence the use of off-shore “The ECB supports the intention to provide a harmo- the Directive and former prime minister of Denmark ­structures for funds held by international nised regulatory and supervisory framework.” who is now president of the Party of European ­investors making cross-border investments, ­Socialists, answering a question on if he thinks it is so they only pay taxes in their home ­countries. “The ECB urges the Commission of the European time for an impact assessment of the directive. Communities to continue the dialogue with its This is especially important for pension funds, international partners, in particular the United “Regulation is undoubtedly necessary but we should which are frequently tax exempt. States, to ensure a globally coherent regulatory and not be beguiled by protectionism parading as And what happens next? supervisory framework.” protection.” The Swedish Presidency hopes to reach a “An internationally coordinated response is ­necessary “Private equity and hedge funds weren’t central to common position within the Council before given the highly international nature of the industry the financial crisis.” it hands over to the Spanish Presidency, and the consequent risks of regulatory arbitrage and who will then negotiate with Parliament. evasion.” Paul Myners, Uk City minister ­Parliament will hold its first serious­discussion Jean-Claude Trichet, president ECB within ECON (the Committee on Economic “The private equity industry’s unpopularity means and Monetary Affairs) at the beginning of it has to walk a fine line in its opposition. Complain “With Europe facing strong demographic pressures too much and it risks being dismissed as a ‘bunch ­December and expects to vote on the Directive as a result of an ageing population, pension funds of whingers’. ­Complain too little and the Directive in July 2010. So our work continues apace and will need strong growth and reliable returns over the may get ­bulldozed through. So the industry has we need our industry colleagues, investors coming years in order to meet future demand. If they to ­support general principles like openness and suffer lower returns as a result of the Directive, it’s and portfolio company CEOs to join us in ­consistency while sticking the boot into proposals it not only Europe’s pensions funds but Europe’s pen- meetings and ­educational roundtables, and be does not like. In short, this is a pointless Directive sioners of both today and tomorrow who will suffer.” vocal on issues that directly affect them and and for once, the industry is right to complain.” cause concern. Only in this way, can we hope Andrew Baker, CEO of Alternative Investment The Economist, September 17th 2009 to reach an outcome that is fair, relevant and Management Association proportionate. IMPORTANT DATES

Council of the European Union (EU) 8 September 16 October 28 October 3 & 9 November 16-17 & 26-27 November 10-11 December European Parliament (EP) Council Working Groups Council Working Council Working Council Working Council Working European move to attaché level Groups Meeting Groups Meeting Groups Meeting Groups Meeting Council

1-2 October 20 October 29-30 October 10 November 2 December May 2010 ECOFIN ECOFIN European Council, ECOFIN ECOFIN Discussions with the Council Council Brussels Council Council Council and Commission

2009 2010 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul.

28-29 September 9-10 November 21 January 16-17 March July ECON Committee Hearing and workshop with Deadline for tabling 2nd discussion on 1st vote in full plenary meeting industry representatives amendments the amendments

2 September 6 October 1-2 December 22-23 February 12 April 1st exchange of views in 2nd exchange of views in Presentation of the EP’s draft report Discussion on the Vote in the ECON the EP’s ECON ­committee the EP’s ECON committee (with specific proposals for amendments) amendments Committee

IK NEWS 3/09 – 13 INSIDE IK

GREETINGS/HARVARD

HEALTHCARE-­FOCUSED RASMUS MOLANDER AWARDED ­SEVENTH IK INVESTMENT PARTNERS FINNISH AMERICAN ­SCHOLARSHIP

Helsinki-born Rasmus Molander’s long-standing interest in healthcare and his significant work experience in the sector made him an obvious choice for the IK scholarship. He will use the award to finish his MBA degree at Harvard Business School, where he is starting his second year this autumn.

Rasmus, you became interested in health health care sector, including focused capital care issues while you were still in high allocation and expertise in managing growth. school. Can you tell us why? However, in order to solve the ­fundamental I am attracted to the healthcare ­sector challenges facing healthcare, political because, like energy, education and ­decisions need to be made to provide the right finance, it is vitally important to modern environment for competition in the sector. society. Healthcare is also an exciting mix Until legislative reform is introduced, private of science, politics and business. equity firms can best support the development In your opinion, where do the ­greatest of the health care sector by demonstrating the challenges lie in the Western health care benefits of reform and investing in firms with Experience to date system? value-based business models that can thrive in The main challenge facing Western the current environment. health­care systems is shifting from Have you made any plans for the near future? Helsinki University of Technology: Master of cost and resource based management After I graduate from Harvard, I will probably Science with distinction in technology – ­conducted study into expenses and returns to ­value-based management — which return to Europe to work in the health care for pharmaceutical R&D is ­defined by medical outcomes per sector. I have a clear career goal: I would like Finnish naval academy: Promoted to Second dollar spent. Change is vital because to help improve the effectiveness of our health lieutenant cost and ­resource based manage­ment care delivery systems. I also want to make a Monilaite-Thomeko: Advisor on acquisitions and p­rinciples are generally seen as leading to tangible contribution towards improving the new business ­continuously rising costs, quality issues productivity of research and development in Bio Fund Management, Nexit Ventures, Finnish related to fairness and transparency, and the pharmaceutical, biotechnical or medical Technology Agency: research into venture capital slower innovation. technology fields. Boston Consulting Group: Promoted from On the basis of your experience in health Any last words? associate to consultant in a record 12 months – care and private equity firms, what new I would like to thank IK Investment Partners involved in several major healthcare projects and solutions can private equity bring to the for the scholarship. It is important recognition private equity due diligence industry? and will be invaluable in helping me attend Languages: Swedish, Finnish, English, German Private equity firms have a lot to offer the one of the top universities in the world.

Greetings from Harvard!

It is autumn at Harvard, and students manufacturing companies, government departments most of the educational facilities at the university have ­returned to campus. Almost everyone in and non-profit organizations in developing countries. without worrying about the MBA programme me at Harvard Business The variety on offer seems to highlight the wide recruiting pressures. School spent the summer between their first range of opportunities that are still available to MBA But for all the students and second year doing a summer internship. students, despite the current state of the economy. here, it looks like the I chose to spend my summer working for Indeed, as the economy recovers, companies are ­beginning of a great ­Fidelity in London, learning more about ­investing starting to recruit more actively. Most MBA students year and the perfect in public company stocks. are working on getting to know companies better, ending to a wonderful As I listen to my fellow students’ stories, it making contacts and preparing for job interviews. experience! is fascinating to realize how diverse people’s Some have already decided what they want to do after ­summer experiences have been. Some have graduation. A few were lucky enough to bond really Warm regards from spent their time working long hours at invest- well with their summer employer and get a full-time job Boston, ment banks, consulting firms or hedge funds. offer. For them, the second year at Harvard Business Antti Hovila Others have worked more balanced hours at School will be a tremendous opportunity to make the

14 – IK NEWS 3/09 INSIDE IK

IKARE/SOS HOT SPOT/HAMBURG

Josephine Ahlers, Assistant Team Germany, IK Guten morgen It is 7 o’clock in the morning in Hamburg and the sun is rising. The Alster river is lined with picturesque President Yoweri Museveni of Uganda ­jogging paths so an early run by the water provides a great start to the day! As you run, you can see and highlights SOS programme success feel this great city waking up. After an Alsterrunde, Sleeping sickness (or trypanosomiasis) is a lethal disease it is time for a hearty breakfast. There are plenty of charming coffee houses where you can browse through threatening more than 60 million people in sub-Saharan books and papers and soak up the atmosphere. Africa and 10 million in Uganda alone. The disease also causes around three million cattle deaths each year and What next? has a very negative impact on farming in the region. From here it is not far to the port district. At the Magellan and Marco Polo Terraces, the smell of the he Stamp Out Sleeping sickness (SOS) campaign, launched in sea still reminds you of the days of the Hanseatic ­Kampala three years ago, has made significant progress and was League. The Elbe Philharmonic Hall, a new Hamburg T highlighted by ­Ugandan ­president Yoweri Museveni in his opening landmark, is under construction, but there are plenty speech at the International ­Scientific Council for Trypanosomiasis Research of other attractions around the port district. These and Control (ISCTRC) ­Conference in Uganda last September. include the International Maritime Museum and the “Uganda has successfully halted the merger of the two forms of sleeping Miniature Wonderland. In the heart of the city, the sickness through a public private partnership to implement a Stamp Out Hagenbeck Zoo, with its cuddly polar bears, is an ­Sleeping sickness (SOS) campaign,” exciting place to take children. Even sports enthusiasts said ­Museveni. can find plenty to do in Hamburg, like watching a game “Uganda has successfully The public private partnership of football in the popular city stadium, the HSV. For halted the merger of the includes IK/IKARE, the universities those who prefer something more tranquil, there is the two forms of sleeping of E­dinburgh and Makerere and the ­Swedish church, the Gustaf Adolf Kyrka. Right near ­international veterinary company CEVA the ­Portuguese district, the church café is a wonderful sickness through a public Santé ­Animale. The Ugandan ISCTRC venue for drinking coffee and eating pastries. private partnership to arranged a round-table meeting on SOS implement a Stamp Out comprising all interested stakeholders, Hamburg by night Sleeping sickness (SOS) including the local head of the WHO For those who fancy something a bit more substantial, campaign.” delegation, representatives from affected one of the best places to eat in the city is the restaurant yoweri museveni, president, uganda local ­communities, district veterinary Nil, a delightful French-style bistro in Neuer Pferde- officers and key government staff. markt. All the meat is organic and the vegetables are Several resolutions were tabled at the meeting. First, it was agreed that the locally sourced. After dinner, you can treat yourself to a SOS consortium should meet soon to work out details of the next phase of the night cap at the nearby Goldfish Bowl. The atmosphere project. Second, it was resolved that programmes promoting technologies that is relaxed, the music melodic and you may well be are easy to adopt at community level should be supported, strengthened and tempted to linger over your drink. consolidated as part of the implementation of the SOS campaign. Third, the meeting resolved that technologies, such as community screening at village Bright lights level, utilization of trained personnel at community level and block treatment But if you want to really sample Hamburg’s vibrant of animals should continue using the private sector. night life, take a stroll over to the St. Pauli entertain- The public private partnership has now been asked by the Ugandan ment district. Countless bars and clubs encourage you ­authorities to expand its work. As a result, Anne Holm Rannaleet from to forget time altogether. From there, the Hamburg fish ­IKARE flew to Uganda to discuss how the programme might be rolled market on the waterfront is just a out to its second phase and what resources this would entail. The British short walk away, where local tra- ­Government Department for International Development has expressed a ders tout their produce – delici- strong interest in participating in this phase through its “Research into Use” ous, freshly-caught fish. There is programme and planning work for the coming 18 months with an aim to no need to buy anything. You can ­double the number of treated animals is well under way. just wander through the market and pick up a coffee on the way. The SOS initiative now has its own web-site where you will be able to follow Because, it is 7 o’clock in the mor- progress and read news as well as download the SOS video. Check it out at ning and the sun is rising ... www.stampoutsleepingsickness.com

IK NEWS 3/09 – 15 XXXX XXXX A NIGHT TO REMEMBER On September 9th, IK celebrated its 20th THE BIG CELEBRATION anniversary in London

16 – IK NEWS 3/09 A NIGHT TO REMEMBER XXXX XXXX On September 9th, IK celebrated its 20th THE BIG CELEBRATION anniversary in London

IK NEWS 3/09 – 17 Helena Stjernholm: “Since the summer, we have seen signs that private equity deal flow is ­returning. IK is well positioned to take advantage of opportunities as they emerge.”

The last twelve months will go down in history as a cut costs by focusing on their core business and selling period of unprecedented financial drama.N o sector has off non-core assets. IK is well placed to create value escaped the economic downturn. In private equity, we for these ‘corporate orphans’, applying our operational have been forced to deal with numerous challenges — a know-how and experience in buy-and-build strategies. fall in demand for our portfolio companies’ products and services; a credit crunch; and liquidity pressures on An example of our ability to effect real operational ­institutional investors. improvements in the businesses we acquire is Prevesta, But just as the magnitude of the crisis surprised us all, an investment from our IK2004 Fund. The company so has the speed and force of the recovery in economic and manufactures prefabricated houses with two strong financial conditions, albeit from a low level. brands, Myresjöhus and SmålandsVillan. We acquired Every six months the Swedish Venture Capital it in 2005 from the Swedish construction conglomerate Viewpoint ­Association issues an update on private equity investment Skanska, which considered it non-core. activity in Sweden. The report for the first half of 2009 After the acquistion, the company ­implemented showed the freeze in deal activity that followed the onset an extensive change programme, updating and “The mag- of the financial crisis had continued during the first six ­streamlining its production methods, and moder- months of this year. nising the entire business. As a result, the business nitude of The report was published in mid September. By that achieved strong growth in sales and profitability the crisis time, it was already clear the gloomy picture it depicted during our tenure. The workforce grew from 400 to was old news. Since the summer, sentiment has become over 500 and Prevesta became the leading player in its ­surprised more positive, especially in the mid-market where IK field in Sweden. us all, and operates. In 2007, IK sold Prevesta to the Block Watne Group, A number of factors lie behind this shift. The early one of Norway’s leading house builders, generating so has the signs of recovery, or at least stabilisation in the world a multiple of close to 10 times the original cost to speed and economy and the rally in equity markets, diminished the investors. ­uncertainty around company valuations, reducing the risk IK is also in a strong position to deal with the force of the premium that buyers had been demanding. Meanwhile, ­current credit market situation, where more equity ­recovery access to credit financing for deals has improved. Banks and less debt are required. That’s where IK’s are now prepared to finance acquisitions of companies in ­value ­creation strategy, emphasising fundamental in eco- stable industries, though at lower levels of leverage. ­operational ­improvements, can perform best. Our nomic and industrial expertise and experience are valuable assets IK is well placed to take advantage of the opportunities in an ­environment where the opportunities for pure ­financial created by this more benign environment. ­financial engineering plays are limited. conditions.” Firstly, having closed our IK2007 Fund just before the The private equity industry will be characterised onset of the crisis, we have capital to invest. Only 20% of by a ‘back to basics’ approach in the next few years, the €1.7 billion fund is currently invested, putting IK in focusing on operational improvements and earnings a strong position, particularly as fund raising conditions growth in portfolio companies. This is an area where remain challenging in the industry. Many investors face IK has a solid track record. We look forward to building liquidity constraints and are simply unable to make new on this record for the benefit of our investors and other commitments. stakeholders. Secondly, we see attractive investment opportunities in the mid-market segment. Many companies are keen to helena stjernholm, partner, ik