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Europe’s largest publicly traded private equity group is preparing an acquisition push for what it expects will be a wave of consolidation in the $10tn private capital industry, as smaller firms or those facing succession challenges sell to larger rivals.
Stockholm-based EQT is studying acquisitions of specialised private investment groups including so-called secondaries firms that buy private equity fund stakes, growth-oriented investment firms and those with a niche focus in healthcare, chief executive Christian Sinding told the Financial Times in an interview.
“There are still geographies and capabilities that we don’t have, both in growth investments and in private equity,” said Sinding. “If we woke up one day and found a great healthcare growth business in the United States, that could be something for us.”
“We might also try to get some capabilities under EQT’s roof in solutions and secondaries . . . It is such an important part of what we could do for our clients at the fund level and the portfolio level,” he added.
Other possible acquisition opportunities include asset managers, or investment teams, focused on digital infrastructure such as data centres, or the so-called transition from carbon-emitting industry.
Sinding said any acquisitions would be used to complement EQT’s existing businesses and that no deals were imminent for the group.
EQT listed its shares in Stockholm in 2019 as part of a long-term strategy to use its public stock, presently worth $36bn, as an acquisition currency. In recent years, EQT has acquired large asset managers outside of its existing expertise in European and North American private equity and infrastructure investments. Its assets under management have increased more than fourfold to €246bn since its IPO.
In 2022, EQT bought Barings Private Equity Asia for €6.8bn, securing a toehold in Asia. It acquired Exeter Property Group, a large manager of industrial warehouses, the prior year.
Other private equity groups of EQTs size, including TPG and CVC, have made a similar strategic decision in recent years, listing their shares as part of a diversification push that has fuelled their growth in overall assets.
Sinding said all private equity groups are facing a moment when they must clarify their strategy, as pensions, endowments and sovereign wealth funds choose to invest with fewer managers whom they believe have resources to sustain investment consistency.
“There are many market forces that will come to bear in this next cycle. If you go to market and don’t have a succession plan, or you don’t have an edge, or you haven’t scaled your capabilities, people aren’t going to give you capital,” he said. “Some firms are going to come out good enough, but others will go out of business.”
EQT has refused to push heavily into credit investments after Sinding jettisoned the group’s debt investment platform in 2020 and has resisted calls to re-enter the space. Unlike peers including Apollo Global, he believes private equity remains a growth market because companies continue to leave the public markets and prefer to partner with private equity owners.
Sinding predicted EQT would eventually be able to do buyouts of between $30bn and $50bn in size as many midsized or family-owned companies remain private and decide to grow into global giants while in private hands.
“There are pension funds, sovereign wealth funds and other institutions that are under-allocated to private capital,” he said. “You add all the capital from private wealth and there’s a huge resource that we can tap into.”
https://www.ft.com/content/f6862f4b-9052-477c-9ba8-0e3007eaf1e5
