Ministry of Employment and the Economy of the Repu : Assessment: The role of Finnish Industry Investment Ltd. as a business environment developer should be strengthened

09.01.2014 10:00

In the time that it has been in operation, Finnish Industry Investment Ltd. (Tesi) has had a significant impact on the development of the capital investment market and the emergence of investment funds in Finland. According to a recent assessment, the dominant market position and considerable assets of Tesi should be utilised more efficiently than is now the case. This would promote the development and internationalisation of a commercial capital investment market that functions more efficiently than is currently the case.

The assessment in an international evaluation of Finnish Industry Investment was published on 9 January 2014.

Tesi has been influential especially in the growth in investments in the growth phase of companies, as its share of Finnish venture capital and growth financing is between 30 and 40 percent. According to the report, an increase in the target level of Tesi requires clarification and sharpening of ownership steering on the part of the Ministry of Employment and the Economy.

The main focus of the investment activities of the company has shifted in recent years to financing of the later phases, which does not correspond to the present needs of the market.

Tesi fixes shortcomings on the market

Fellow investors and collaborative partners consider the operations of Tesi to be professional, and that they fix shortcomings on the market. The company's business idea and general goal is fairly clear. The company operates independently and concentrates on dealing with individual investments. The general development of the capital investment market does not have a significant role in the company's operations.

"The assessment by Tesi indicates how the company has worked convincingly in its own sector and established confidence in its activities. In a constantly changing world there is nevertheless a need for a player such as Tesi, which continues to take responsibility for the development of the entire Finnish capital market", says Minister of Economic Affairs Jan Vapaavuori.

The evaluation proposes that the setting of goals should be renewed and expanded within the current marginal terms in such a way that the activities would more clearly advance the development of the field of players in the private sector and the cultivation of its service know-how in capital investment activities. In setting targets, the goals of government's industrial and innovation policy should also be taken into consideration more comprehensively.

Focal point on attracting more private money onto the market

Focal points of Tesi should include the establishment of new fund players and the encouragement of private money onto the market. The company should seek, step by step, to replace public input with private money in order to bring the overgrown state share of the funding down to the level of countries that Finland is being compared to. Investments should in the future more clearly target a smaller number of companies in such a way that the unit size of the investments is sufficient to allow internationalisation.

In the long term, an internationally competitive commercialisation financing and capital investment plan based on private financing, as well as operational environments that support it, should be created. In the short term, the function of the present system of public financing as a single whole, as well as the creation of prerequisites for a market based on private funding, should be secured.

"There is reason to consider that Tesi is just one player, albeit an important one, in the field of corporate finance. We have previously started the examination of the situation with private financing, so that companies that are growing and becoming more international might get sufficient backing from state financing elements", Vapaavuori says.

Tesi is the biggest public sector player in the capital investment field. About half of its approximately 400 million euros in investments target the financing of companies' initial or growth phases, and the other half is for the later so-called buyout phase. According to the marginal terms of ownership steering, the company makes investments according to conditions on the market together with, and under the same conditions as private investors, and the activity needs to be profitable in the long term.

The assessment by VALOR NAG Partners can be read on the website of the Ministry of Employment and the Economy: http://www.tem.fi/en/current_issues/publications

Further information:
Pete Pokkinen, Special Adviser to the Minister of Economic Affairs, Tel. [phone]
Industrial Counsellor Sakari Immonen, MEE, Tel. [phone]