Following the bids on Mercell and Ørn Software, EcoOnline also announced they were going public to private. All in the last weeks. The three offers come from large international private equity firms. Moreover, the companies receiving the bids are or have been Viking Venture portfolio companies. In this post, managing partner Erik Fjellvær Hagen explains why this is happening now. In addition, why the PE houses are interested in our companies.
– Firstly, software company valuations have fallen by 50% in the last six months. From an investor’s perspective, this change in the stock market makes it an exciting buying opportunity for companies who want to become owners of Nordic software companies, Erik Fjellvær Hagen, explains (photo right).
– Secondly, it shows that a company which receives a bid with a significant premium is of the highest quality. So, it is very encouraging to see that all the offers for taking public companies private that have come lately are for companies where Viking Venture has played a central role. As an active owner, we find it is satisfying to see that the most prominent software investors want to be owners of our companies, he adds.
– Thirdly, when the companies went public, it was with the intention to continue to build the companies further. An essential part was raising significant capital to make acquisitions and grow faster organically. In the current market sentiment, the opportunity to raise money on the stock exchange is limited, inhibiting company growth. Therefore, we believe that delisting companies with the help of investors with significant available capital will help further organic and inorganic growth, as seen from the companies’ side.
– Lastly, it is not pleasant to see the values fall for the investors who have joined a company at listing. However, with such good share premiums, it becomes possible to realize an investment made in different market sentiment and reallocate that capital to other investments. For an investor to have the option to make a realization is always positive. We must accept that the market has fallen and can not do anything with that. Each investor must decide what they want to do based on their own assessments.
The intention to go public was based on a plan to grow the companies. Thus we ought to look at the development of these companies from the time they went public until today. The growth in annual recurring revenue (ARR) reveals a strong development for all three companies as they have increased their ARR significantly while being public. Mercell has increased its ARR 2.8 times from NOK 290 million to NOK 817 million during this period. Ørn Software has gone from an ARR of MNOK 122 to MNOK 238. EcoOnline has grown to an impressive 477 MNOK from the initial 348 MNOK.
In hindsight, we could not have predicted how the market would look a year after going public. Therefore, our priorities have been to develop strong companies independently of the market sentiment. These priorities show in the solid underlying performance of all three companies, which is now starting to become evident among other prominent software investors wanting to take the companies private.
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