Nordic mid-market GP Axcel has completed an investment into XPartners Samhällsbyggnad, which was a “completely proprietary deal” that the firm developed itself, Thomas Blomqvist, partner at Axcel, told Real Deals. 

“We have earmarked partners for the various industries that we're focused on, and in this case, the deal came through our network within industrials and business services,” he added.

The deal sees the portfolio company acquired from Finnish PE investor Evolver Equity, with the exiting GP remaining a “significant” non-controlling shareholder alongside the founders, other employees and Axcel.

Created in 2021 through a merger of five companies, and now at six, Sweden-based XPartners is a technical consulting group, specialising in infrastructure, public and commercial buildings, as well as environmental services.

Contextualising the deal’s origination, Blomqvist pointed to the GP’s former investment in the technical installation space, which is now a little over two years old. Though slightly different to technical consulting, the partner notes adjacencies between XPartners and its installation company, Currentum.

He added: “We have grown Currentum from three businesses to about 50 companies. When we closed the deal in December 2020, the company had about €80m in revenues; now turnover is about €450m.”

Blomqvist explained that the technical consulting market caught wind of Axcel’s investment strategy for Currentum, a platform that saw an average of two add-on acquisitions per month, and the benefits received by the selling entrepreneurs, who remain shareholders in the company.

“The entrepreneurs who reinvest together with us benefit from the cooperation opportunities we provide in the marketplace between the companies belonging to the Currentum group, which inter alia includes sharing expertise and reference cases,” explained Blomqvist.

“It makes a lot of sense for a smaller player to join our platform, as they can benefit from scale within administration, reporting, financing, IT and staff training, among other things,” said Blomqvist. “They’ll also be able to offer their customers a broader set of services by including the services of other companies in the group, and of course there is an opportunity for the entrepreneurs to reinvest and be part of the financial upside.”

Therefore, when XPartners saw an opportunity to accelerate consolidation within the technical consulting market, it was looking for a firm with a track record to support it. After Axcel scoped the technical consulting industry, it began an exclusive dialogue with the group in the second half of last year.

The investment into XPartners represents the first transaction from Axcel’s Fund VII, thereby confirming that the fund has already held its first close. The GP, which almost exclusively does leveraged buyouts, revealed that Nordea provided debt on the deal.

“We buy companies with revenues and earnings, which means that they can support a bit of debt. So, we have some debt in this transaction as well,” said Blomqvist. “But not too much, actually, because we are embarking on an accelerated consolidation, and that will require funding. We will expect to use further debt as part of that, starting low so we don't hit the ceiling quickly.”

While the investment size remains undisclosed, the firm did reveal it approached the valuation of XPartners from a few angles: benchmarking against publicly-listed peers, private M&A transaction data, and Axcel’s own LBO models.

The PE firm is currently focused on four sectors – tech, healthcare, consumer goods, and industrial and business services – with the latter being one of Axcel’s biggest verticals and the one the firm has conducted the most business in, alongside tech. The team is increasingly doing more in healthcare, while consumer goods activity is more selective, according to Blomqvist.

Axcel said sustainability-focused technical consulting services are currently in “high demand”, with the firm expecting the market and, therefore, expansion opportunities to grow in the coming years. “The technical consulting market is large and fragmented, with thousands of companies out there. Consolidation within local markets means that you can get much more traction with customers as you can offer a broader set of services,” said Blomqvist. 

Citing XPartners’ “favourable” end-market exposure, including in infrastructure, public and commercial buildings as well as environmental services, Axcel also expects the consulting group to fare well throughout the economic cycle.

Sticking to the tetradic theme, Axcel’s investment strategy also has four pillars: commercial excellence, sustainability, digitalisation and buy-and-build. As reported by the GP, XPartners will seek to emulute Currentum’s buy-and-build story.

For this reason, three more technical consulting companies are being added to the group of six companies in conjunction with Axcel’s investment. Therefore, XPartners now consists of nine business units employing approximately 400 people across 30 offices in Sweden, generating about SEK600m (€52.9m) in total revenue. Further to this, Axcel pledged to expand the group, within both existing and new market segments and regions.

By including more businesses, the GP believes there will be a greater opportunity for cross-selling between XPartners’ companies, which are offering similar but not identical services, thereby resulting in complementary service offerings to the same client.

As the lead partner responsible for driving the investment, Blomqvist will join XPartners’ board, where he will be accompanied by a second partner from Axcel, as is customary for each board of the companies the firm invests in. Blomqvist added that the GP has some “verified qualified people” for external board members.

Axcel is currently in the midst of raising its seventh fund, following Axcel VI, which held its final close on €807m in 2021 and is still actively investing. The sixth fund has made 12 investments so far.

Having made 68 platform investments and 48 exits since its founding in 1994, the firm now has a stake in 20 companies, including XPartners. Across all of its funds, it has raised €2.8bn from both Nordic and international investors.

Blomqvist was responsible for the XPartners transaction, with Jacob Walberg and John Kleven Falck also part of the deal team. They were advised by Rene Partners (corporate finance), Vinge (legal), KPMG (financial due diligence), Roland Berger (commercial due diligence) and EY (ESG due diligence).