Information on the Target

Xllnc Group AB (“Xllnc”), predominantly owned by Norvestor VII, L.P., has acquired REPLACE OÜ (“Replace”), a prominent mobile and IT equipment recycling provider in Europe. The acquisition aims to create a synergistic relationship that will enhance both companies' positions in the sustainable IT service market, collectively managing over 1 million IT devices.

Founded in Estonia in 2016, Replace has seen rapid growth, expanding from 53 employees and €5.3 million in revenues to 250 employees and over €70 million in 2019. Replace offers electronic asset management services, including refurbishing and re-marketing of used mobile and IT equipment, and boasts a customer base of more than 500 clients.

Industry Overview in Estonia

The IT recycling sector in Estonia and the wider Nordic region is witnessing accelerated growth, driven by heightened awareness of sustainability and responsible consumption. The positive trend is in response to global initiatives aimed at reducing electronic waste and promoting circular economy practices. Enterprises are increasingly prioritizing environmental responsibility, fostering a robust demand for IT lifecycle management services.

Estonia, being a tech-savvy nation, has positioned itself as a hub for innovative IT solutions, with a thriving startup ecosystem. This environment has enabled companies like Replace to flourish, expanding their services beyond borders to meet the increasing demand across Europe.

The European market's regulatory landscape concerning e-waste management is becoming progressively stringent, compelling companies to adopt sustainable practices. The implementation of regulations, such as the Waste Electrical and Electronic Equipment Directive (WEEE), has encouraged businesses to prioritize efficient recycling processes and responsible disposal of electronic products.

As the IT sector becomes increasingly scrutinized for its environmental impacts, sustainable IT solutions are no longer just a competitive advantage but an essential part of business strategy, thereby accentuating the relevance of services offered by companies like Replace.

The Rationale Behind the Deal

The merger of Xllnc and Replace presents a strategic opportunity to tackle the IT industry's significant contribution to CO2 emissions, which is comparable to the aviation industry's share. The acquisition aligns with Xllnc's commitment to sustainability, enabling the company to offer comprehensive IT management solutions that prominently feature environmental considerations.

By integrating Replace’s recycling expertise, Xllnc aims to be the first Nordic IT services provider to offer large-scale sustainable IT services. This initiative not only enhances service offerings but also contributes to global sustainability goals, addressing the ever-growing demand for environmentally responsible business practices.

Information About the Investor

Norvestor is a distinguished private equity firm specializing in lower mid-market buyouts throughout the Nordic region. Established in 1991, the firm boasts a team with extensive experience in executing investments and managing growth initiatives. It has completed 71 investments alongside over 250 add-on acquisitions, highlighting its capability in scaling enterprises.

Norvestor's investment strategy focuses on growth companies, predominantly in Norway and Sweden, with ambitions to establish leading positions in the Nordic market. The firm applies its vast sector knowledge to identify opportunities for expansion through organic means or acquisitions, positioning itself as a reliable investor in transformative industries like IT recycling.

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This acquisition is expected to be a sound investment for both Xllnc and Norvestor, given the growing importance of sustainability in business operations. By enhancing their capacity to offer sustainable IT management solutions, the companies can capture a significant share of a rapidly expanding market. This growth is fueled by increasing regulatory demands and consumer preferences for environmentally responsible practices.

Furthermore, the combined expertise of Xllnc and Replace, along with their complementing service offerings, creates a formidable presence in the Nordic and European markets. This positions them favorably against competitors and opens up additional opportunities for synergies that could lead to further growth.

A notable factor supporting this deal is the backdrop of climate concerns that are increasingly directing corporate strategies. Companies committed to sustainability are likely to attract a loyal customer base, enhancing revenues and market reputation. Thus, this acquisition not only makes strategic sense but also aligns with broader societal trends.

While challenges may arise in effectively integrating operations, the strategic overlapping of cultures and target markets will likely yield operational efficiencies and innovation. Overall, the acquisition of Replace represents a proactive step towards a sustainable future, aligning with global trends while delivering significant business potential.

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