EQT readies final close on Fund VIII

Swedish private equity giant EQT is projected to close its latest 8 billion euro ($9.63 billion) flagship fund in February, an LP memo obtained by Buyouts shows.

The memo, prepared by StepStone Group for Connecticut Retirement Plans and Trust Funds, reported that EQT VIII was expected to hit or exceed its target. A February final close would mark a relatively speedy fundraise for EQT, whose plans to launch Fund VIII were first reported in June 2017 by the Wall Street Journal.

As with its previous funds, EQT VIII will acquire high-quality companies in the mid- or upper-middle market, typically investing 150 million euros to 800 million euros per deal. Most EQT deals are for companies located in Northern and Central Europe, though it can pursue opportunities in the U.S. and U.K. as well.

In its memo, StepStone cited the firm’s strong track record, team stability and portfolio-company growth among the key reasons in recommending Connecticut allocate up to 80 million euros to Fund VIII.

The firm’s funds were netting an aggregate internal rate of return of 21 percent and a multiple of 1.7x since its inception in 1994, according to the memo. Even its most recent flagship vehicle, which was deployed quickly and remains relatively immature, was marked as netting a 13 percent IRR through mid-2017.

Connecticut and StepStone memos highlighted a handful of concerns about the firm, including the steep prices it paid for some of its newer portfolio companies. Through October, EQT paid an average of 14.8x EBITDA for Fund VII’s portfolio companies, which include several investments in expensive market sectors like technology, media, telecom and healthcare.

However, some of EQT’s most successful investments, including acquisitions of European cable operators Com Hem AB and Kabel BW, were paid for at multiples exceeding 10.5x, StepStone reported.

“Despite EQT’s higher entry multiples, the GP has demonstrated its ability to strengthen and grow portfolio company performance and strategic value, which has contributed to EQT exiting its investments” at multiples that exceed the purchase-price multiples, Connecticut staff wrote in a separate memo.

The memo did not disclose the management-fee or carried-interest terms offered by the firm. EQT declined comment.

The firm’s previous fund closed on 6.75 billion euros in 2015 and was heavily oversubscribed, Buyouts reported at the time. So much so, San Diego County Employees Retirement Association saw its preferred commitment of 100 million euros halved.

EQT has 19 offices and has raised 38 billion euros since its inception. Four of the firm’s five original founders — Conni Jonsson, Thomas von Koch, Jan Stahlberg, and Fredrik Atting — will have a role in managing Fund VIII, the StepStone report says.

Action Item: For more on EQT, visit www.eqtpartners.com

Sweden’s flag is seen near the Stockholm Cathedral in Gamla Stan or the Old Town district of Stockholm on June 9, 2010. REUTERS/Bob Strong