Northern Europe-focused EQT has held a first and final close for its seventh buyout fund on its €6.75 billion hard cap after just six months in market, according to a statement from the firm.
The firm officially started fundraising toward the end of January and was initially looking to collect €5.25 billion, Private Equity International reported earlier this year.
The fund was “significantly oversubscribed”, with more than 70 percent of commitments coming from investors in prior EQT funds. Investor interest was understood to be around €11 billion.
Christian Sinding, partner and head of equity at EQT, told PEI it was important to remain disciplined regarding fund size.
“We wanted to have a fund which could enable EQT to both stretch a little bit more on the larger transactions with some bigger roll-up ideas, but at the same time stick to our guns and stick to what we’re really good at. So we tried to get the balance of a nice increase from the previous fund, but not too large.”
It is understood that the fund includes a GP commitment of more than two percent.
Investors in the fund include AP3, AP6, APG, Ardian, Argentum, CNP Assurances, Danica, GIC, HarbourVest Partners, KEVA, KIRKBI Invest A/S, Ilmarinen, The Andrew W. Mellon Foundation, New Mexico State Investment Council, New York City Retirement Systems, Partners Group, PFA, Sampension, Signal Iduna, USS and Varma, according to the statement.
It is understood that new investors in EQT VII include PGGM and the Teacher Retirement System of Texas.
EQT VII is the first buyout fund raised by the firm after Thomas von Koch, who has been with the firm since inception, succeeded Conni Jonsson as a managing partner in March 2014.
The firm has returned around €17 billion to its investors since 1995, and the average gross money multiple on sold deals from EQT’s buyout activities over the last 20 years is understood to be around 2.8x.
“We generate our returns by building companies. Almost 80 percent of the value that we’ve generated has been the result of sales growth and EBITDA growth, so it’s very much EQT’s industrial approach to private equity that’s driven those strong returns over time,” Sinding said.
Instead of deploying the vehicle over the standard five year period, EQT will be able to invest the fund in six years.
“We think it’s useful to have a bit of a longer timeframe due to current macro-economic uncertainties. Having capital committed for a little bit longer is an advantage,” Sinding said.
“The base case will be that we invest this fund in the more typical time frame of four and a half years or so, which has been close to the average for EQT in the past. The only difference is we now have a possibility to stretch that period.”
Although EQT has been deploying capital a steady rate of more than €1 billion per year since 2004, distributions have outstripped investments by between two and two and a half times, it is understood.
“It is generally a good market to sell right now. Valuations are relatively high and the IPO market, which was closed for many years, is open, and we want to take advantage of that,” Sinding said.
EQT is still investing its previous vehicle, the 2011-vintage EQT VI which closed on €4.82 billion. The fund has signed its penultimate deal – Danish family brick-house retailer HusCompagniet – and it is understood that the fund is close to closing its final transaction.
“Our pipeline is strong, but we do have to be very, very selective and pursue our ‘locals with locals’ approach of using our network of offices around Europe to develop transactions other buyers cannot. What we’re looking for are companies where we can really make a difference,” Sinding noted.