Hunt Corporate Orphans After Deregulation

"This marked the beginning of a twenty-year period of deregulation in traditionally protected industries such as telecom, TV, energy, rail traffic, education, healthcare, elder care, and pharmacies. No other country was as aggressive as Sweden in breaking up monopolies, and this unexpectedly created lucrative opportunities for private equity firms. Here, operations with dominant market positions and stable revenues were sold; it was like a dream. Thus, a gigantic transfer of wealth occurred, as profits quickly multiplied in the companies once they were privately owned. In many state-owned companies at that time, there were no incentives at all to influence revenues and costs, which meant the potential was great."

"“We saw that there were many medium-sized companies that needed owners when the conglomerates were streamlined. EQT’s first acquisition was Brukens, which we bought from the steel group Böhler Uddeholm in 1995. Brukens hadn’t been managed with the left hand, it hadn’t even been managed with the left little finger. They needed a new owner.”"

"Lindex and Ellos were prime examples of so-called “corporate orphans,” companies whose owners—in these two cases, grocery giant ICA—had abandoned them to their fate. It was rewarding. Under IK, the strategy was developed, among other things, for Lindex to focus on children’s clothing, which became highly successful. Lindex was eventually listed on the stock exchange, and in 2007 was bought up again by the Finnish clothing chain Stockmann."

"Volvo’s then-CEO PG Gyllenhammar, who for many years was considered Sweden’s most powerful person, was one of those who bought into this reasoning. Among other things, he added the food company Procordia and the pharmaceutical company Pharmacia to his automobile business. A group like the forestry company Stora owned Swedish Match, which in turn not only produced matches, but also building materials, flooring, cardboard, and machines for fish gutting. Nokia manufactured such diverse products as televisions and rubber boots."