As inquiries for investment increase, big changes are set to continue in many Faroese companies — meanwhile a change in the ownership of venture capital firm Notio may not make very much difference for its own management.

Observers familiar with the Faroese business environment may be puzzled at the thought of what the recent ownership change in Notio will mean for the firm known as ‘the first private Faroese venture company.’

At the end of 2007, the then 50-percent owner of Notio, Iceland’s Kaupthing Bank, sold its entire Faroe Islands operation to Eik Banki, after which the management of Notio was transferred to Eik Banki’s head quarters in Tórshavn. As a matter of agreement, Notio’s other 50-percent owner, Fram Invest, will reduce its share to 10 percent at the latest this summer, making Eik Banki the 90-percent owner of the investment firm.

In his new office, managing director Kristian Petersen noted that no dramatic changes should be expected as a result of the transfer, neither in the way Notio conducts general business nor the way its investment portfolio is managed.

“In principle, our business philosophy remains the same,” he said. “It’s these two criteria for investment: firstly, good prospects of profitability; and secondly, good exit options. It’s a very broad policy and that’s necessary for retaining a high degree of openness and flexibility, which is crucial in our special market.”

With the limited size and scope of the Faroese business scene in mind, that kind of policy may well be a prerequisite for success in the marketplace. However, Notio’s market is by no means confined within the borders of the Faroes, Mr Petersen said.

“The fact that we’re based in the Faroe Islands doesn’t prevent us from investing in overseas markets. You may say our primary focus is on the Faroes and neighboring countries to the extent that we feel sufficiently informed of potential risks and benefits. But we encourage entrepreneurs to think globally because we believe that’s where the future is — the world is shrinking very fast and everyone can see it, even islanders in the middle of the North Atlantic.

“Well, generally speaking, our investment decisions are made on a case-to-case basis. What we do is ask: Are we looking at an exciting investment opportunity? Now, that opportunity can be anything — a new business idea with good potential for development; or some innovative value addition in products and services. Or something else; essentially there’s no limit.”

Arguably due to increased access to cash, a growing number of Faroese companies have been traded in recent years, something that is seen as remarkable when compared with earlier times. Since 2002, the year Notio was established with Eik Banki as one of the founding partners, mergers and acquisitions have rocked the Faroes more than once—in what is widely viewed as a period of radical change.

“These changes are far from over,” Mr Petersen said. “We are in fact receiving more inquiries than ever.”

Why do people sell their businesses?

“The reason for selling a private company varies according to circumstances. More often than not, such moves are linked to generational change but there are many other reasons too. For instance, an owner wants to quit because of a career change; or perhaps two or three partners want to dissolve a partnership for whatever reason… By far most of the companies here are small family businesses and in such companies, maybe to an even greater extent than in larger companies, ownership change and management change are two sides of the same coin.”

Obviously, generational change can represent a serious challenge to an organization and is often very time consuming.

“Well, it’s very individual and the process can take anything from a few weeks to a few years — managing such change comes easier to some than others. Much depends on the character of the key persons involved and their relationships; but sometimes the business can be of such nature that it requires extensive training and expertise, which can complicate matters. For some persons, it’s exceedingly hard to let go whereas for others, it’s easy as pie.”

As to Notio’s current portfolio, the largest item, now fully owned, is FaroeYard (Tórshavnar Skipasmiðja), the leading shipyard in the Faroe Islands. Another major portfolio item: a one-fourth share in Faroe Seafood, the country’s leading fishing company.

While retaining a one-third stake in Faroese seed capital fund Set, Notio has sold its interests in Kollafjord Pelagic as well as PM Group (Poul Michelsen).

Recent additions include a 30-percent share in H-Dygd, a manufacturer of windows and doors; and one-sixth in clothing designer Guðrun & Guðrun.

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