Investments in funds, Investments in companies, Impact - 31.3.2009
Government-owned investment company Finnish Industry Investment Ltd made new investment commitments in 2008 totalling MEUR 150.3, of which MEUR 130.9 was in funds and MEUR 19.4 comprised direct investments in growth companies. The parent company exited from 3 companies, while the subsidiary Start Fund I Ky made follow-on investments in 34 growth companies amounting to MEUR 6.8. At the end of 2008 Industry Investment had investments totalling MEUR 573.3, and the company was an investor either directly or through funds in altogether 438 companies.
The private equity market was active during the first half of 2008. New investment opportunities were plentiful and profitable exits were made. The focus of fund commitments was on funds investing in growth companies. The uncertainties sparked by the finance crisis subdued the deal flow after the summer, however, especially in the large buyout market. The economic situation faced by portfolio companies customers and sluggish demand increased business challenges towards the end of the year. The scarcity of bank financing and differing views in the valuation levels of companies brought buyout projects to a halt. Existing portfolio companies need for follow-on investments became even more important.
Most investment commitments were in the energy and environment sectors, industrial technology, services, life sciences and mobile technology. Consolidation also accounted for a large proportion of commitments. The volumes of both fund investments and direct investments fell slightly below the previous years levels.
The Group posted a loss of MEUR 23.8 for 2008.
The sharp decline in valuations of investments resulted in a net loss for 2008 after a number of consecutive profitable years. Projects in progress have difficulties in finding loan financing or new investors. Meanwhile, Finnish investors are holding a record amount of uninvested capital. Adjusting to the changed market situation poses a major challenge for the sector in the near future. A long-term and active approach combined with a willingness to take risks are the best way to promote Finnish business, says President & CEO Juha Marjosola.
At the end of 2008, Industry Investments outstanding investment commitments, altogether MEUR 573.3, were divided between fund investments (72.5%), the Kasvurahastojen Rahasto I Ky fund that was established together with employment pension investors (9.4%), the parent companys direct investments (8.6%) and the subsidiary Start Fund I Kys investments (9.5%).
Investments totalling MEUR 130.9 in funds
In 2008 Industry Investment gave new investment commitments totalling MEUR 130.9 to nine funds. Of this sum, MEUR 120.9 was allocated to new private equity funds, while MEUR 10 comprised a follow-on investment in the subsidiary Start Fund I Ky.
The focus for new fund commitments was on funds investing in growth companies. The largest individual commitment, MEUR 54, was given to the Kasvurahastojen Rahasto Ky fund that was co-founded with employment pension organisations. This increased the supply of venture capital to Finnish companies. Industry Investments commitments to individual funds were normally in the range of MEUR 5-15.
At the end of the year Industry Investments fund investments totalled MEUR 524. Commitments were given to altogether 87 funds: the subsidiary Start Fund I Ky, the Kasvurahastojen Rahasto Ky fund that was co-founded with employment pension investors, and 85 private equity funds, through which FII was an investor in a total of 339 portfolio companies.
Direct investments totalling MEUR 19.4 in growth companies
During 2008 Industry Investment made direct investments totalling MEUR 19.4 in 17 growth companies. Initial investments in 12 companies amounted to MEUR 16.7 and follow-on investments in 5 companies totalled MEUR 2.7. Industry Investment exited from 3 portfolio companies.
The size of initial investments varied greatly and averaged MEUR 1.4. Portfolio companies need capital to enhance sales & marketing and for new production facilities, acquisitions, consolidation and international expansion. Industrial technology, consumer services and electronics were the targets of most initial investments.
During the 2006-2008 financing programme for the mining industry in Finland, Industry Investment invested in 5 mining companies, of which only 2 remained in the portfolio at the end of 2008. The program was a proven success: projects received financing with exactly the right timing to make progress, and the return on investment was good. Large mining projects have a major impact locally on economic growth, the business framework and employment.
At the end of the review period Industry Investment had direct investments and outstanding investment commitments totalling MEUR 49.3 in 26 portfolio companies.
Start Fund I Ky fund made follow-on investments in 34 growth companies
Start Fund I Ky, an Industry Investment subsidiary, made follow-on investments totalling MEUR 6.8 in 34 companies, representing about one-half of its portfolio companies. The fund completed exited from 10 companies and partially exited from two.
The follow-on investments varied greatly in size, but averaged EUR 200,000. Growth companies need capital particularly for sales & marketing, for building subcontracting and distribution networks, for broadening production or service offerings, and for international expansion. The sectors attracting most follow-on investment are business and industrial products, the energy and environment sectors, services and the IT industry.
At the end of 2008 the fund had investments in altogether 73 companies.
Start Fund I Kys capital of MEUR 50 was fully invested by the end of the year, and the parent company increased the fund by MEUR 10 for follow-on investments, which are essential to companies growth and internationalisation. The companies have found a base of international customers, and the export of products or services forms an important part of many companies business activities. The best results so far have been seen in companies in the energy and environment sectors.
Events after the review period:
Additional capital injection of MEUR 150 in Industry Investment
On 25 March 2009, Finnish Industry Investment Ltds Annual General Meeting (AGM) decided to issue shares in Industry Investment to the amount of MEUR 150, and also decided not to pay a dividend for financial year 2008.
Industry Investments AGM elected Industrial Counsellor Heikki Vesafrom the Ministry of Employment and the Economy to be Chairman of the Board of Directors. Other members elected to the Board were: Johanna Ikäheimo, Chairman of Lappset Group Oys Board; Matti Luukkonen, IS-Capital Oys Managing Director; Raili Mäkitalo, Ministerial Adviser, Ministry of Finance; Kaija Pöysti, Aldanella Oys CEO; Tuomo RönkköMaintpartner Oys CEO; and Taisto Turunen,Director-General, Ministry of Employment and the Economy.
Consolidated loss MEUR 23.8
Consolidated shareholders equityMEUR 390.5
Parent companys lossMEUR 12.9
Parent companys shareholders equityMEUR 410.5
Number of personnel 23
Government investments in Finnish Industry Investment Ltd in the period 1995-2008 amount to MEUR 269.8
COMPANY IN BRIEF
Finnish Industry Investment Ltd (FII) is a government-owned investment company that promotes Finnish businesses, employment and economic growth through capital investment.
FII invests the proceeds accrued from the privatisation of state-owned companies in funds and directly in growth companies. Capital investments are needed for financing the growth and internationalisation of portfolio companies, and for spin-offs, major industrial investments, and sector and corporate restructurings. FIIs portfolio companies operate in all sectors. The company co-invests with private investors, limiting its investment to at most one-half of the capital invested and one-half of the ownership.
Established in 1995, Finnish Industry Investment Ltd is subordinate to the Finnish Ministry of Employment and the Economy.
The companys current investments amount to over MEUR 570.
- Juha Marjosola, President & CEO, Finnish Industry Investment Ltd, tel. +358 9 6803 6811 and mobile +358 50 62 636, juha.marjosola (at) teollisuussijoitus.fi
- Interview requests:
- Asta Sjöblom, Communications Manager, Finnish Industry Investment Ltd, tel. +358 50 552 7273, asta.sjoblom (at) teollisuussijoitus.fi