Current trends in the Private Euqity industry

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.

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.

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.