Interview with Martin Krist, Managing Director – Head of Luxembourg at Nordic Capital Management
By Johann Herz, Head of Events and Communication at LPEA as published in Insight Out #27
Nordic Capital is a private equity investor with a commitment to creating stronger, more sustainable businesses through operational improvement and transformative growth. Since its founding in 1989, Nordic Capital has invested EUR 22 bn in more than 130 companies and executed 91 exits.
Can you introduce Nordic Capital in a few words?
Nordic Capital focuses on selected regions and sectors where it has a strong track record and expertise in growing businesses. These currently include 50 high-potential investments within Healthcare, Technology & Payments, Financial Services, and, selectively, Industrial & Business Services. As an active owner, we target companies that can leverage our skills to realise unfulfilled growth and expansion potential, structural transformation, operational improvement and strategic repositioning. Furthermore, we help them become leaders in sustainable transformation within their respective industries.
Our team is composed of over 225 employees in 10 offices across three continents. Nordic Capital’s most recent fundraise in 2022, Nordic Capital Fund XI, is its largest fundraise to date and closed at its EUR 9 bn hard-cap within just a few months. In 2022, Nordic Capital also raised its first mid-market fund, Nordic Capital Evolution Fund at EUR 1.2 bn.
Tell us more about your Luxembourg footprint?
We invest out of funds and vehicles established in Jersey and Luxembourg. The funds and vehicles and/or their managers are regulated by and under the supervision of the Jersey Financial Services Commission and the Luxembourg Commission de Surveillance du Secteur Financier, respectively. Each fund or vehicle acts through its respective GP or delegated Portfolio Manager and invests in portfolio companies through various acquisition vehicles.
The launch of the Luxembourg Fund Operation’s office was a natural extension of the existing fund services business in Jersey. Whilst we have had a footprint in Luxembourg for 10+ years, the focus has indeed been gradually shifting towards the region.
In 2020, our flagship Nordic Capital Fund X was launched with parallel investor sleeves in Jersey and Luxembourg. For Nordic Capital, there were two rationales for this: One, the rising demand for onshore funds, depending on the investor domicile; two, Luxembourg continues to offer an attractive toolbox for private equity products. Given the success of that fundraise, the succeeding mid-market Evolution Fund was raised as a sole Luxembourg product in 2021. Whereas AIFM services were initially provided by a local third-party provider, we have established an in-house AIFM, in line with our general operating model, which was granted its license in June 2023.
The Luxembourg team is currently composed of eight people, all of whom have been recruited locally and have experience and an understanding of the Luxembourg market and alternatives industry. As we look to the future, Nordic Capital expects to see further and continuous growth in the Luxembourg team and in the mid-to-long-term, plans to make Luxembourg the hub of Nordic Capital’s fund operations.
Nordic Capital focuses on key verticals and specific geographies. Can you elaborate on your investment strategy and process?
We are committed to investing in stable and attractive locations. This includes companies valued above EUR 300m as part of the main strategy but increasingly via the Evolution Fund, in mid-market, high-potential companies valued at EUR 50-300m. Being selective guarantees that Nordic Capital can contribute with genuine knowledge and operational expertise, therefore creating significant value within the companies it invests in.
The investment strategy is first and foremost about the characteristics and approach of the companies that Nordic Capital supports, understanding structural trends and shifts within our focus sectors – whilst avoiding investing in companies that rely on external factors or the macro-trends in the wider economy.
For us, the investment strategy is closely linked to Nordic Capital’s active ownership approach. After identifying growth opportunities, we intend to power-boost a joint plan set up together with founders and management teams to make great companies even better. Our teams bring structure, capital, international sector and operational expertise and a strong external network to help management teams realise their business plans, accelerate growth, and develop in a sustainable way. Best-practice sharing within the portfolio has proven to an efficient strategy.
Furthermore, we adopt a long-term view to ownership. Our goal is to create sustainable companies that can solve global challenges and leave a positive impact in the short term and, then, continue to do so when they take the next step in their growth journey.
Can you give us an example of value creation in your portfolio company?
In 2019, we acquired a majority share in ArisGlobal, a high-potential provider of innovative SaaS software. Together with the founding family, we developed a joint plan to accelerate the company’s growth and provide better environmental health, social equity and economic vitality for future generations – and create a global leader in the space.
Nordic Capital has continued to support ArisGlobal in establishing a consistent track-record of profitable customer implementations, as well as transforming from a point solution to a more diversified platform. In addition, several strategic M&A transactions will continue to build ArisGlobal’s offering across strategic areas. The company has benefitted from continued investments in R&D, cognitive computing, global delivery, sustainable operations, and commercial excellence. During our investment period, ArisGlobal has seen revenues increase by 53 per cent and the number of its employees has increased by 25 percent. This has enabled the company to further transform the industry and help more companies handle safety, development, compliance, and medical affairs in a better and more cost-efficient way.
ArisGlobal continues to further integrate ESG measures and, ultimately, reduce its climate footprint. In addition to lowering its carbon emissions, by utilising renewable energy and sending excess energy to the common grid, it puts as much effort into being socially responsible.