European non-public fairness group EQT says now’s the second to purchase into US | USAEMALL.com

European private equity group EQT should capitalise on investor fears about the US to build up its business in the country, buying up rival firms if necessary, its founder and chair has told the Financial Times.

“We probably need to get more presence in the US,” said Conni Jonsson, who started the asset manager in 1994 and built it into Europe’s largest private equity firm with €273bn in assets.

“Everybody is now running away from the US. And that might be a good time for us to do more”, he said, adding that the firm could either expand in the country through mergers or acquisitions, or grow organically.

Jonsson’s comments come in the week that EQT’s new chief executive, Per Franzén, took over from Christian Sinding, one of the firm’s early employees and its chief for the past six years.

Franzén, 49, has stepped into the top job as the world’s largest private capital firms are being forced to seek new sources of growth.

Some top pension funds have cooled on investing in the US, halting or reassessing their private market investments into the country until the policy environment stabilises.

With the sector also struggling to sell portfolio companies and raise money from institutional investors which have found themselves overinvested in the sector, many firms are accelerating efforts to raise money from wealthy individuals, as well as merging with each other and diversifying into new strategies.

“There is a lot of talk about the focus on . . . sending cash back to investors [and the] more challenging exit environment,” Franzén told the Financial Times. “That is something the industry has to work through over the next couple of years.”

Franzén, who owns more than €600mn of EQT shares, said the sector had survived similar challenges in the past, including when he joined EQT as an associate from Morgan Stanley in 2007.

“People at Morgan Stanley were saying I was joining [EQT] at the peak of the market, when all the low-hanging fruit had been picked,” he said. 

Franzén told the FT that infrastructure could become the firm’s biggest business, part of a wider trend in the industry for private capital groups to diversify into areas beyond the buyouts where they made their name.

“I wouldn’t be surprised [if] at some point going forward this part of our business will be the largest part,” he said.

Infrastructure accounts for about a third of EQT’s assets under management compared with about 60 per cent for private equity. Franzén, who became the head of EQT’s private equity business when the group listed in 2019, declined to put a timeline on the shift.

“It’s just a massive growth opportunity,” he said, adding that the need for digital infrastructure, data centres and the energy to power them were “the big themes we’re investing behind”.

A Stockholm native, Franzén’s deals for the group include veterinary roll-up IVC Evidensia, which was last valued at about €12bn in 2021, and software business IFS, now valued at €15bn.

As chief executive, he will be tasked with bedding in a string of acquisitions after a period of expansion under predecessor Sinding, who oversaw the purchase of Asian buyout firm Barings in 2022 and real estate group Exeter a year earlier. 

Franzén said he wanted to make sure “the organisational set-up, the design, is the right one”, with EQT having grown from about 600 employees at the time of its listing to almost 2,000 today. 

The firm recently explored a tie-up with Arctos, which did not respond to a request for comment. A person familiar with the matter said Arctos was of interest because of Keystone, a specialist division that works with private markets firms on selling parts of their group or setting up vehicles to buy portfolio companies from themselves.

Franzén must also navigate the changing role of Jonsson in the firm, who has played a hands-on position as chair but, at 64, is planning to step back from some activities. 

“I’m gradually stepping down from certain investment committees,” said Jonsson. “I will focus more on the things that [are] important for the board to look at: strategy, organisation, that Per is doing a job and that we are moving the firm forward strategically in the right direction.”

EQT will have to demonstrate to investors that it can generate strong returns from recently launched “adjacent” strategies, including small-to-mid-cap healthcare, growth and long-hold private equity and infrastructure funds. 

The growth fund, launched in 2021 to explore opportunities in the tech sector between venture capital and private equity, has struggled with performance after investing at market peak and as a result has recently pivoted more towards buyouts, according to people familiar with the matter.

One of the people said fund performance had since improved despite 2021 — when tech valuations were near their peak — being a difficult year to launch a growth fund.

“Per is probably a bit less of a consensus seeker than Chris has been,” Jonsson added. “Things are changing so fast around us today so it’s important that we have a leader with the self-confidence to . . . make decisions fast.”