Director of a Canadian capital fund: We have an appetite for more Danish companies

The original article was written in Danish and translated into English via Google Translate. Any discrepancies or differences created in the translation are not binding and have no legal effect for compliance or enforcement purposes. If any questions arise related to the accuracy of the information contained in the translated website, refer to the Danish version of the article which is the official version.While the past year has been quieter for corporate deals, a Canadian capital fund is on the hunt for Danish companies. The sieve is only aimed at small- and medium-sized companies where owners are ready for a change. Lynx Equity, headquartered in Toronto, Canada, has been active in Denmark since 2017 with its first acquisition of PartnerService, a cleaning company. Since then, there have been five more Danish acquisitions. Lynx Equity’s sixth Danish acquisition, Majland Stauder, was acquired in December 2022; this is a B2B plant nursery located in Sønder Omme.

“The overall focus is on investing in small- and medium-sized companies from owners who want to retire,” commented Ashley Manis, Lynx’s Vice President of M&A in Scandinavia. “In terms of size, these are typically companies with an EBITDA result (operating profit, ed.) of DKK 5-25 million.”

The capital fund was founded in 2007 and in addition to companies located throughout Canada and the USA, Lynx has also made investments in the UK and Denmark, just as negotiations are currently underway in the Netherlands. In total, Lynx currently has 56 companies in its portfolio.

The strategy is to take over the acquired companies 100% and unlike classic capital funds, Lynx does not withdraw again after typically 5-7 years after the acquisition. Ashley explained, “as a rule, we only entertain companies with a potential for the future and do not want to sell again. When we evaluate a company, we look at its historical stability, thereby ensuring a sense that it can continue going forward. Typically, these are companies with a generational change, so the crucial thing is also to ensure a good transition when we come in.”

The Danish companies at Lynx range from cleaning and plants to machine production and stairs and doors. Ashley states that the capital fund is not focused on specific industries, “there are some industries that we stay away from – for example, high-tech and pharma, which as growth sectors, acquisitions in these industries are based on large turnover projections. We see good business and strong people in many industries, therefore we are not limited.”

Two of Lynx's Danish companies, PartnerService and Yding Gruppen, who both work in cleaning, have just announced a merger to strengthen the activities. “This exemplifies our business model in that we also look at new opportunities that might work together with other of our existing portfolio companies,” explained Ashley.

An analysis by PWC of the Danish owner-managers showed in autumn 2022 that 62% of those companies had been contacted about selling the company – while the share was 73% in 2021. The analysis also showed that several owners/managers are open to a sale in the longer term.

According to several analyses, the number of business transactions fell, for example: from EY in 2022 compared to the previous year. On the other hand, the proportion was higher than before the COVID-19 pandemic.

The multiples/price of the traded companies fell by 30% in 2022, compared to 2021.

However, according to the consulting firm Bain, the market is rumbling. Partly because the banks are starting to become more willing to lend money, and more capital funds are also ready. “The funds are holding a lot of companies they want to sell and they have a lot of money they want to use to buy,” explained Benjamin Sommer, Bain Partner, to Finans in February. “So, I think that in the second half of the year, there will be more movement in the market.”

At Lynx Equity, Ashley Manis states that the capital fund also receives many inquiries from the Danish market about possible acquisitions, from both advisers and business owners. “The uncertainty with high inflation combined with the pandemic means enough,” explained Ashley. “More people want security for the future and as business owners, people want options for pensions, for example. There are no limits to how much we want to invest in; we are really a fund with investors who do not go after certain sectors or are closed about certain industries, they appreciate the diversity of our investments. The possibilities have only become greater the more transactions. As a capital fund, we work with partners in Europe, the UK, and North America and they are always happy to finance our deals in Europe. The appetite on our end is clearly there.”

Ashley explained that it was originally a bit of a coincidence that Lynx became active in Denmark: her first trip there was to visit a number of advisers, and the endeavor to tap into the Danish market has evolved since.

To read this original article in Danish, please click here.