EQT races toward €10.7bn hard-cap

The firm has ‘had its arm bitten off’ by investors trying to get into Fund VIII, which will be nearly 60% larger than its predecessor.

EQT will hold a first close on Fund VIII before the end of the year as it races towards its €10.7 billion hard-cap, according to investor sources.

“They are having the arm bitten off,” said one member of the investment advisory community on the sidelines of a recent event in London.

A clutch of substantial fund closes this month is contributing to what will prove to be an astonishing year of fundraising across the global private equity industry. As of mid-December, more than $507 billion has been collected. On Monday TPG announced the close of its fourth growth capital fund on $3.7 billion, while Warburg Pincus has officially closed its debut financial services-focused fund on $2.3 billion, as PEI reported last week. Also on Monday, Stamford, Connecticut-based Olympus Partners formally closed its seventh fund on $3.04 billion.

The same investment consultant described the current fundraising market as being like “a cake eating competition, where the winner gets more cake”.

EQT began marketing for the fund in September. Investors participating ahead of the impending first close will benefit from a management fee reduction, said two sources. LPs can also benefit from a reduced management fee if they make a commitment above a certain size threshold, the investors said. The size of the fee reductions is not known.

The firm has deployed around €8 billion in equity in the last two years at an average multiple of around 15x EBIDTA, one of the investors said. EQT declined to comment.

The €10.7 billion total has already been allocated, said one of the sources. Some LPs need to wait until the new year in order to use their 2018 allocations, hence the firm waiting until after year-end to hold a final close.

EQT raised €6.75 billion for its previous flagship buyout fund in 2015, which has not yet made any exits, according to EQT’s website. It was delivering a 1.1x return multiple as of 31 March, according to an investor source. The firm’s €4.8 billion 2011-vintage EQT VI delivered a gross multiple on invested capital of 2x and net internal rate of return of 15 percent as of 31 March, the same source said.