Current trends in the Private Euqity industry
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1. What changes are emerging in the European private equity industry from your perspective?
For one thing, variability in deal doing is increasing. In other words, you see more and more transactions where private equity takes a minority position as a shareholder, where the governance model of full control is softened, or where private equity acquires a company together with a strategist. On the other hand, the integration of relevant industrial know-how is playing an increasing role for private equity. This applies both to the analysis of opportunities and to the discussion and decision-making in the Advisory Board. In addition, the first signs of greater differentiation can be observed, especially in the mid-market, for example in the form of specialization in specific sectors.
2. What contribution has EQT made to the development of its portfolio companies? Where do you see the greatest potential here? Especially in the DACH region?
The approach we use to drive the development of our portfolio companies in the mid market does not differ significantly between regions. We want to enable our portfolio companies to accelerate their growth. After our entry, companies therefore always invest in improved scalability. Depending on the company and the sector, this can involve recruitment, improving systems, implementing new systems and also investing in the warehouse, logistics or production. In this context, we support companies not only in raising capital or recruiting C‑level managers. In addition, we support projects with relevant know-how from EQT’s broad network. In addition, almost all of our companies have made at least one acquisition. Here, too, we support the M&A process with our know-how. However, it is also essential that we always have an industrial majority on our advisory boards. For the strategic topics, we have bundled relevant experience in the advisory board to enable management, founders and advisory board to discuss and decide on current changes at eye level. So, in addition to the good positioning of the company, local and industrial expertise are also essential for us to successfully realize the potentials.
3. EQT is an active PE investor in China. What is the current trend here? (e.g. are there industry trends?)
Both in terms of volumes of new funds and investments, we see an increase compared to the three previous years, which were rather flat or slightly declining. The buyout market in China has shown substantial growth since 2013. This trend is largely driven by take-private transactions amounting to several billion USD. Examples include transactions such as Giant Interactive, Focus Media, Asiainfo, 7 Dats Group, AutoNavi. In the period 2010 to 2012, large buyouts accounted for approximately 19% of PE transactions. In 2013, this figure increased to 36.1%. Due to an increase in billion USD funds, this trend will continue in 2014 and beyond. Like some smaller PE funds that have a longer history in the Chinese buyout market, EQT is currently benefiting from a very active seller’s market. EQT, for example, has completed three exits this year. Since 2006, EQT has invested in 12 companies in Asia with either control or co-control governance. Of these, 9 transactions are attributable to Greater China.