IK’s CEO Chris Masek, discusses how long-standing initiatives at the firm led to impressive achievements in 2022, and have also prepared it well for the years to come.
What achievements are you proudest of from the past year?
Winning Pan-European House of the Year at the Private Equity Awards 2022 and being recognised by our industry was such a proud moment for us. Beyond a prestigious trophy, last year was the culmination of an outstanding period covering many important milestones. We had a record year of fundraising, portfolio performance and returns to investors, and expanded internationally, opening our New York office for IR and fundraising and launching our UK mid cap strategy.
We also rebranded to IK Partners, a subtle name change that better reflects our current momentum and strategy of pursuing “People-First Private Equity”. I could not have been prouder of our own people and the immense talent IK boasts. We were also honoured to promote five colleagues to the partnership recently, some of whom started their private equity careers with us and are a testament to how investing in your own teams can add value to the wider group.
What has set you apart from your competitors over the past year?
The last year has seen us bearing the fruits of our unique approach that we have been fine-tuning for over 30 years, partnering with growing companies and supporting them as they scale up and expand into new markets by combining proactive buy-and-build strategies with operational improvements.
We focus on businesses in Benelux, DACH, France, Nordics and the UK, concentrating on business services, healthcare, consumer and industrial sectors. Typically we will have already identified a series of strategic add-ons before a new investment is even signed, giving us an edge with competitive deals and enabling us to accelerate companies’ growth strategies and our exit opportunities.
Our seven European offices are all supported by IK’s capital markets, operations and ESG teams so while our platform investments are sourced through our experts in local markets, the portfolio benefits from the combined resources available across IK. This makes life easier for management teams and helps us drive superior returns as we take advantage of the collective skills across the group.
How have you maintained strong investment and exit activity over the past year despite the ongoing challenges of the pandemic?
Our people-centred approach and clear investment strategy helped drive strong investment returns. The priority at the time was safeguarding the health and welfare of our employees and the 35,000 people across the portfolio. Our operations team really came to the fore and worked tirelessly to mitigate the impact – from making initial impact assessments to the development and implementation of recovery plans. IK’s long-standing and disciplined investment criteria ensured a resilient portfolio capable of operating through economic turbulence. We continued the planned exits on our original timetable and were well placed to execute on several exciting investment opportunities that became available.
IK also conducted an impressive fundraising round. How did you manage this?
Throughout all the disruption, we have raised over €4.3bn since the first lockdown across our mid cap, partnership and small cap strategies. We held fully virtual fundraising processes, with our IR team building strong relationships with both new and existing LPs.
Our track record of delivering impressive returns is clearly an important factor, but so too is maintaining the “client experience” to ensure that existing LPs feel confident in returning to us for future funds. This is where our IR and communications teams come in, as their ability to articulate our strategy, respond to investors’ needs, and update on developments helps build the confidence among LPs to continue investing with IK.
What single deal from the past year best sums up your particular approach and its strengths?
BST, the fire protection services provider, is a great example of what IK does best. We first invested in 2019 when the company only had a presence in Sweden. By the time we exited in 2021 the company had expanded to Denmark and Norway, built out new finance, HR and sales functions with the support of our operations team, and grown revenues threefold. In just three years, BST went from an entrepreneurial small cap player in Sweden to a market-leading mid cap champion across Europe.
What are your predictions for the coming year?
We are clearly in a changing environment with inflationary and supply chain pressures increasing, to which labour churn, wage inflation and social unrest should be added, with the backdrop of rising interest rates and increased difficulty to access new capital. We believe demonstrating liquidity will be key with Jerry Maguire’s proverbial “show me the money” taking the lead over the hubris of paper valuations. We equally believe that focusing on developing portfolio companies, securing conservative balance sheets, and keeping an eye on churn and inflation to deliver growth will be tantamount to delivering further liquidity.
We believe there will be attractive investment opportunities at more reasonable multiples using more rational baseline metrics (cash EBITDA rather than multiples of ARR) with conservative financing. Finally, the most determining change in our industry will be accessing new capital. Investors will be taking their time to consider which strategies are the winning ones in this new environment where we see a move towards quality and tangible performance as the key differentiator. We believe our firm has long been prepared for this and will thrive in this new paradigm.
This article was first published in Real Deals on 30 June 2022 and was written by Hannah Langworth.