Njord Partners’ Arvid Trolle: AI now a ‘natural part’ of how firm operates; Advent agrees to acquire FNZ Bank

Morning all, Craig McGlashan here with the Europe Wire from the London newsroom.

Private equity firms are finding plenty of ways of leveraging artificial intelligence to improve efficiencies at portfolio companies, even if senior dealmakers tell us that using the tech to boost the revenue side of the EBITDA equation is trickier.

This morning, we hear from Njord Partners’ Arvid Trolle about how his firm is using the latest AI tech to boost operational efficiency in its portfolio.

We finish with a look at another deal in the world of wealth management, where Advent, alongside a consortium including HarbourVest Partners, has agreed to acquire FNZ Bank.

Lean approach

Njord Partners is leaning into artificial intelligence to improve operations at its portfolio companies, including applying the technology in supply chains to improve demand forecasting and inventory management, Arvid Trolle, co-founder and partner, told PE Hub.

London-headquartered Njord invests in European mid-market companies with enterprise values of €40 million-€500 million and capital needs of €20 million-€75 million. It invests across capital structures in industrials, chemicals, consumer goods, communication, energy, materials, transportation and infrastructure. The company tends to invest in companies faced with complex situations.

PE Hub caught up with Trolle about the firm’s investment strategy, the state of the exit market and more in the latest of our ongoing Q&A series with private equity thought leaders.

Here’s a snapshot:

How has AI changed the types of assets you’d consider for investment?

AI has become a natural part of how we operate across the board. We use it to maximize both customer acquisition and retention, processing large volumes of customer data, spotting behavioral patterns, and building predictive models that allow us to target customers more precisely through tailored messages and personalized offers (Ambassador is a good example of this).

AI enables us to have better tools to reach the right customers and grow at a faster pace, but we don’t build an investment case on the assumption that AI alone will deliver step-change growth in acquisition.

We look for companies with strong underlying potential that have been run inefficiently, and we implement a lean approach across all areas. AI is one of the tools we use to achieve this.

In supply chain, that means better demand forecasting and inventory management, cutting working capital and stockouts (Il Lanificio is a good example). In customer service, it means faster response times and a more proactive service for our customers that increases customer satisfaction (eg Ambassador).

We don’t underwrite deals on the assumption that AI will deliver these gains, but once we are involved in the business, AI is a key part of how we drive the operational improvement that’s core to our investment thesis.

What does a typical exit look like for Njord, and how strong is the exit market more generally?

The best way to position for exit is to have a well-run company with strong operations and good prospects. In special situations, we’re often looking at businesses with real potential that have been overlooked, mismanaged or misunderstood. Improving how they are run creates attractive, profitable companies, which in turn attracts buyers.

Well-run companies with good prospects will always attract interest from serious buyers, whether strategic or financial – this is the same across all sectors, not just consumer businesses. We have seen resilience in the value segment and this is reflected in the exit market as well, where more defensively positioned companies are attracting interest even when M&A activity generally is muted.

Check out the full article for more on Njord’s investment strategy and details on its recent investments.

Editor’s note: This story is part of PE Hub’s ongoing series of Q&As with PE thought leaders.

Wealth play

Wealth management deals have been one of the biggest drivers of private equity M&A in the financial services sector, as we covered on our Sector Spotlight on the industry earlier this year.

The deals keep coming.

Advent has agreed to acquire FNZ Bank from FNZ, together with a consortium including HarbourVest Partners. The investors plan to support FNZ Bank through its next phase of growth, with long-term investment in technology and operational capabilities aimed at enhancing its product and service offering for partners.

FNZ Bank is an independent wealth management banking and infrastructure provider in Germany, offering banking, custody, transaction execution and regulatory services. It connects more than 50,000 financial advisers, 200 asset managers and over 400 distribution partners, serving more than 2.1 million end-customers, with €155 billion in assets under custody.

Germany’s aging population and widening retirement savings gap are increasing the importance of private retirement provision, with FNZ Bank providing infrastructure that helps advisers and institutions build long-term wealth, according to a press statement. The firm said these structural trends provide a strong foundation for growth and plans to help FNZ Bank broaden access to capital markets investing across Germany.

That’s it from me today. Rafael Canton is in the US chair later today and I’ll be back with you from Europe tomorrow.

Cheers,

Craig