Nordic Capital’s exit of Falck A/S: An analysis of the IPO decision

Mads Lund Bjerregaard & Joachim Permin Dalgaard

Student thesis: Master thesis


In April 2010 the general sentiment in the market for IPOs was positive, with other large Danish companies owned by Private Equity (PE) funds were close to IPOs. In June 2010, the Danish producer of ingredients, Chr. Hansen, completed their IPO, the first Danish IPO in 5 years. It was said that Chr. Hansen’s successful IPO would accelerate the IPO of Falck, as it showed that the markets was capable for handling IPOs – the window of opportunity was now open. Falck was continuously claimed to be very near an IPO in the media. Therefore it came as a surprise when Nordic Capital announced the sale of 36 % of their shares to The Lundbeck Foundation in December 2010, and the IPO was taken completely off the table in April 2011 as Nordic Capital sold the remaining 44 % shares to Lundbeck, Kirkbi and the management of Falck. This goal of this thesis was to evaluate Nordic Capital’s exit of Falck, describing both the market conditions that were cited as the primary reason for not going public, the fair value of Falck equity and Lundbeck’s offer price of 85 DKK pr. share in relation to the former two. The market conditions are quantified with the use of a modified version of Jason Draho’s (2000) model, which views the going public decision as a real option. In this, the value of the option to time the market fluctuates with the market conditions, and when the IPO is completed, this value is lost. We therefore see the option as an opportunity cost of the IPO, to be included together with all other costs, such as underpricing, filing fees and the underwriter spread. Together with traditional valuations methods, we find that the fair value of Falck equity as of 01.01.2011 was 9,102 mDKK, and the cost of the proposed IPO was 948 mDKK. We found that at that time, that Nordic Capital’s net proceeds of the IPO was slightly higher than a sale to Lundbeck, corresponding to a benefit of 0.5 DKK per share. We also found that for that decision to be changed, either market volatility should increase to at least the levels of late 2008 where volatility was at its highest, or that expectations for the required underpricing to attract investors should exceed the historical average of Danish IPOs.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2011
Number of pages137