“This is just the start!” DevCo takes mid-sized companies to world class

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Development company DevCo has an exceptionally strong bunch of seasoned specialists behind it. Not only that, its operating methods and objectives are unique. DevCo plans to join the forces boosting Finland’s economy by growing a handful of medium-sized companies into international leaders. Founding partner Otto Kukkonen explains how it plans to do so.

The three co-founders of  DevCo, Teemu Alahuhta, Lauri Stadigh and Otto Kukkonen, became acquainted while studying at the Aalto University School of Business in Helsinki. Teemu and Otto worked at the same time as interns in the financial sector in London, where Otto stayed on to work after completing his studies. Meanwhile, Teemu and Lauri worked in various companies in Finland’s and Sweden’s financial sectors.

“We gained experience mainly of conventional venture and equity investment, in which the tendency is to sell the best companies quickly and keep the weaker companies longer – partly due to the ownership horizon. We wondered whether this was always the best option from the viewpoint of developing the more promising companies’ businesses, so we decided to create an alternative operating model. We want to focus on only a handful of companies at a time and to develop them over a long time frame. Our structure permits a 15-year ownership period, but we can remain involved with a company for longer if necessary – in fact, as long as we’re useful to the company,” Otto explains.

DevCo’s goal is to transform a few highly specialised medium-sized companies into world leaders. The model is borrowed from Germany’s strong economy, which is partly based on a strong group of vigorous and internationally expanding mid-sized companies that have had the same owners for a long time. DevCo feels it is helping to boost Finland’s economy. If DevCo succeeds, everyone in Finland will benefit.

Otto Kukkonen
“When screening companies, DevCo gives a particularly high weighting to the industrial sector”, says co-founder Otto Kukkonen.

A Finnish owner for the growth-oriented mid-size

Founded in 2014, DevCo has two companies in its portfolio. Medix Biochemica, a developer and provider of critical components for diagnostic tests, and Vexve Armatury Group, a manufacturer of valves. DevCo engaged in negotiations lasting a couple of years with both companies before the transaction was finalised. Financing is on hand for a third portfolio company.

“We started out in Finland because its population structure means that many companies will undergo a generational change over the next 5–10 years. Among them are a lot of medium-sized  companies (net sales €50m–€500m) that would fit our operating model,” Otto says.

“We’re an alternative to selling a company into foreign ownership. There isn’t so much choice in Finland when it comes to players with adequate resources for operating in this size range, and there aren’t many like us in Europe, either. An important factor in our operations is that we don’t pressure anyone into selling their company. Instead, both parties must be willing to collaborate,” comments Otto.

When screening companies, DevCo gives a particularly high weighting to the industrial sector. In Otto’s opinion, the ingredients of success for a medium-sized company are a good team, committed personnel and a dynamic sector. It is fair to say that even a good team can rarely infuse excellence into a business if the whole sector is in decline.

“Ideally, the sector would be specialised and of sufficiently limited size so as not to attract the industry giants, but nevertheless big enough to proffer opportunities for profitable business,” he explains.

Training programme for a new generation of managers

DevCo provides a company with both material capital and human capital. DevCo’s partners are also ready to step into an operational role. They are supported by a seasoned team of Senior Advisors that includes Kari Stadigh, Klaus Cawén, Sari Baldauf and Kerttu Tuomas, who are all experienced directors, as well as DevCo’s Board Chairman Matti Alahuhta. But if a company has already succeeded in growing into a mid-sized export company under its own steam, why does it need people to develop it?

“Even if a company possessed world-class expertise, additional support is often needed to speed up internationalization. Most Finnish firms are export-driven, but the management of a global company requires competence to support it. The main bottleneck for even leading firms is often that they have narrow resources in terms of expertise,” Otto says.

Otto’s greatest concern is where internationally expanding Finnish companies will find enough skilled managers as the ageing generation stands down. DevCo arranged a joint six-month top management training course for Vexve’s and Medix’s expanded teams (consisting of 35 people from seven different countries). Participants developed their strategic thinking and self-awareness while also learning to work as a team. The first three face-to-face training days were held last December.

“We implemented DevCo Academy together with Aalto Executive Education. Alongside enhancing top management’s skills, our goal is that they work in their companies over a long time frame and operate on shared values. This is a very large investment for us, but we believe this is a good way to grow a new generation of top managers,” says Otto.

Vexve rose to rank among Europe’s 10 largest

DevCo bought Vexve’s entire capital stock in 2016 from Jarmo Nieminen, who re-invested some of the proceeds in Vexve. He has since continued as an investor in some other DevCo projects. In August 2019, Vexve bought Czech valve manufacturer Armatury Group, a company that was larger than Vexve in terms of net sales. The newly named Vexve Armatury Group subsequently ranked among Europe’s ten largest valve manufacturers.

“A Finnish manufacturer buys a foreign player larger than itself – there have been regrettably few such deals in the past. But this is just the start. If we operated as a conventional investor we’d already be contemplating our exit, but we see here an incredible opportunity to build something better and more lasting in an extremely interesting industrial sector,” enthuses Otto.

“Successful companies often need a combination of capital and hands-on resources as well as a favourable climate, but above all they need time. When everything clicks into place, the company is in a position to take a leap up to the next size range. We hope to create in this way the framework for even more Finnish-based companies to achieve spurts in growth.

Otto made a personal contribution to Vexve, also, by stepping in as the company’s interim CEO and by moving its registered office to Sastamala, Finland, for a year. He acquired in-depth knowledge of the company and its operating sector during that time and, most importantly, bolstered Vexve personnel’s trust.

“It’s been highly rewarding to see how much it means to the company’s identity that a small valve firm can succeed internationally also. Vexve currently has some 750 employees, of whom about 600 work outside Finland. New types of management and processes are now needed so that everyone plays by the same rules. It is for this very reason that training is so crucially important. The best talent is generally grown in-house,” Otto says.

Huge opportunities ahead

Otto explains that DevCo engages in continuous dialogue with potential portfolio companies. It is quite probable that Vexve and Medix will grow even more through acquisitions, and meanwhile DevCo is looking for a third portfolio company.

“So far we’ve bought four companies, all from their founding owners who wanted to re-invest the money they received back in the company. This shows their confidence in DevCo. Two of the acquisitions were outside Finland, in the Czech Republic and the USA,” Otto comments.

Otto hopes that DevCo could become an incubator for gifted employees.

“We want to find not only the most interesting companies, but also the best talent. In an ideal situation, DevCo or our portfolio companies can offer interesting jobs to gifted employees within the firm and act as a springboard for those that want to continue their careers elsewhere,” he says.


Otto Kukkonen

Who he is: One of DevCo’s co-founders. Vice Chairman and former CEO of Vexve Armatury Group.

Education: MSc in Finance from the Aalto University School of Business.

Earlier work experience: RIT Capital Partners, Merrill Lynch International.


DevCo Partners Oy

What it is: A development company founded in 2014 with the objective of building and developing over the long term world-leading companies in selected niche markets. Provides companies with full-time hands-on resources, strategic support, long-term capital for growth and tailored ownership solutions.

Partners: Teemu Alahuhta, Lauri StadighOtto KukkonenJuhani Laakso and DevCo’s Board Chairman Matti Alahuhta.

Investors: Antti Herlin, Ilkka Paananen, Matti Alahuhta, Georg Ehrnrooth, Timo Ahopelto, Petteri Koponen, Juha Hulkko, Keva, Ilmarinen, Rettig Group, OP Financial Group, Argentum and Tesi, among others.

Portfolio companies: Vexve Armatury Group and Medix Biochemica. In December 2019, DevCo raised €180 million of long-term capital for its next investment platform.