A forerunner in the locking industry brings a tenfold return on investment

Sievi Capital invested in iLOQ in its early years and as an owner supported the company’s growth and internationalisation. The management of this innovative company was pleased with “an entrepreneurial owner who recognises what is essential”.

“The founders, senior management and personnel of iLOQ have done an excellent job in developing the company. Now that iLOQ has entered a new phase of internationalisation, we are convinced that Nordic Capital is a good partner for the company at this stage,” said Päivi Marttila, CEO at Sievi Capital in the stock exchange release back then.

iLOQ had previously announced that it would also explore the listing option, but eventually the sale to another private equity investor was the most sensible option.

“It didn’t matter to us how we exited. The terms were the deciding factor,” says Markus Peura, CFO at Sievi Capital. “It may be better for the company to develop outside the stock exchange without the quarterly pressure.”

Capital, risk-sharing and expertise

Electrical and automation engineer Mika Pukari founded iLOQ in Oulu in 2003 and served as CEO until 2017. Under his leadership, the company launched its first electronic locking innovation in 2008, which received its energy from the key’s physical motion. The company was only at the beginning of its growth path when Sievi Capital made its first private equity investment in 2009.

This initiated fast growth: in 2013, iLOQ became number one in Deloitte’s list of fastest growing technology companies. Between 2008 and 2012, the company’s net sales increased more than 7000 per cent.

Sievi Capital was iLOQ’s active owner and Sievi Capital’s former CEOs Jorma and Harri Takanen served on the Board of Directors.

“Bringing capital into the company and sharing the risk with a founder has been very important in the beginning. In addition, Sievi Capital brought their experience and expertise to the work of the Board of Directors and thereby to leadership,” said Heikki Hiltunen, CEO at iLOQ in Sievi Capital’s Annual Report 2019.

Locking innovations met the trends

During Sievi Capital’s investment period, iLOQ grew and internationalised first in the Nordic countries and later in Central Europe. In ten years, its personnel increased to around 150 employees and the company made good results.

The company manufacturing electronic locking systems benefited from trends that had a strong impact on the industry. These included urbanisation, smart homes and digital integration. iLOQ also developed its industry through strong innovation that combined locking technology, digitalisation and cloud services

iLOQ’s competitive advantage over other electronic access management systems is that their products are self-powered. Since they do not require an external power source, the maintenance and life-cycle costs of the products remain low. A lost key can also be cancelled and renewed in the iLOQ cloud service.

Long investment period paid off

In Sievi Capital’s 2019 Annual Report, Heikki Hiltunen, President and CEO at iLOQ, said that in Sievi Capital’s ownership the company has established a financial base and gained a good market position in Finland and Sweden. He described Sievi Capital as “an entrepreneurial owner who recognises what is essential and acts as a good advisor to the management”.

“Ten years ago, when Sievi Capital became an owner, many probably had their doubts of whether iLOQ would ever amount to anything,” Hiltunen said. According to him, becoming an owner required faith, courage and vision from Sievi Capital.

Markus Peura is satisfied with the development of iLOQ during the investment period. At the time of the first investment in 2009, the company’s net sales were EUR 700,000 and EBITDA negative. In 2019, net sales were 61 million and EBITDA 10 million.

“The company has developed well over the past few years. It was logical to be involved as an owner for longer,” Peura says explaining the long investment period.

“By selling its shares in iLOQ, Sievi Capital received approximately EUR 40 million. In addition, taking into account the dividends received during the years of ownership, we received more than a tenfold return on the investment,” Markus Peura says with satisfaction.