FERD CAPITAL CASE
NOT THE TYPICAL PRIVATE EQUITY FUND
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erd Capital is a Norwegian private equity fund focusing on buy-out and growth company investments with a portfolio value in excess of NOK 5 billion equity capital and NOK 4-6 billion in committed capital for new investments. This makes Ferd Capital the largest Norwegian private equity fund. Ferd Capital has launched an ambitious investment strategy for the coming years of acquiring companies worth NOK 4-6 billion in equity capital before gearing. This means an increased investment activity in both structured processes and own generated deal flow.
Ferd Capital is not the typical private equity fund characterised by a fundraised capital structure comprised of institutional investors, pension funds and private investors. Hence, Ferd Capital’s fund structure rests solely on Johan H. Andresen Jr., heir to a Norwegian tobacco fortune.
ability to avoid wishful thinking and the need to face reality in any given situation, and when all factual assessments have been carried out and conclusions drawn, execution power is key to a successful delivery.
owever, this is not the only way Ferd Capital stands out. First of all, the company prefers a balanced partnership with other investors and does not necessarily demand control. This is quite contrary to many other private equity funds that often emphasise the importance of having exclusive control not only of equity shares, but also of shareholder agreements. Most of the investments are made with other investors (e.g. Telecomputing, Aibel and WTG) where Ferd has ownership shares between 33% and 80% (direct and indirect).
In the Aibel case, it was necessary to launch a share issue of NOK 600 million to provide new capital to the company. Ferd Capital delivered NOK 537 million. One of the partners in Ferd worked almost full time on supporting the management. One of the most important levers to turn the company around was a restructuring of a division that served the Norwegian continental shelf and an international business. The latter operation was closed down or sold off.
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The typical company ownership period of a private equity fund is 5-7 years. Ferd Capital is also different in this respect, seeing themselves more as a long-term investor with a high degree of flexibility with regard to exit timing. If the financial exposure is right and Ferd Capital continues to consider themselves as the best owner of the company, there is no pressure to exit. It is, of course, important that the long perspective does not lead to complacency when the ownership horizon exceeds industry standards. In order to avoid complacency and owner fatigue, Ferd Capital performs regular assessments of their ownership strategy and corresponding value creation plans for the companies with all investments potentially up for sale. It is important to perform market tests once in a while; what is the perceived value under Ferd Capital’s ownership versus the perceived value at a sale? Two of the portfolio companies, Elopak and Swix, have been under Ferd Capital’s ownership for a long period (+20 years), but Ferd Capital believes in their development potential and is therefore actively investing in them.
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hese special characteristics combined with the legitimacy that comes from being in business for more than a century appeal to owners and sellers that are interested in a long-term equity partner. Ferd Capital has been through tough transformation processes with several of their portfolio companies over the last couple of years. Aibel (oil services) is an interesting example to highlight. When reflecting on the Aibel case, the two key words realism and execution power are mentioned several times. By realism is meant the
“However, this is not the only way Ferd Capital stands out. First of all, they prefer a balanced partnership with other investors and does not necessarily demand control.” 20 months later, Aibel won orders worth NOK 12-13 billion due to their superior technical solutions and competitive price. These orders will keep all employees, along with 1,000 yet to be recruited, busy for the next 4-5 years. ABOUT Ferd Capital is part of the Ferd Group, who is a familyowned industrial and financial group. The group has existed since 1849 when the first Johan H. Andresen bought J. L. Tiedemanns Tobaksfabrik. The company has been owned by the Andresen family ever since. However, their operational involvement in the tobacco industry ended in 1998. Ferd Capital actively manages the group’s long-term interests in fully owned businesses as well as significant part-ownership interests in listed and unlisted companies.