EQT Chief Predicts Major Private Equity Consolidation Wave

Christian Sinding, chief executive officer of EQT Partners AB, at the company's offices in Zurich, Switzerland, on Thursday, Sept. 23, 2021. EQT, like many of its competitors, has benefited from record deal flow and fund raising for the global private equity industry. , Bloomberg

Jan-Henrik Förster, Bloomberg News

Jun 6, 2023

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(Bloomberg) -- EQT AB Chief Executive Officer Christian Sinding sees consolidation on the horizon for alternative asset managers due to fundraising pressures and challenging financing conditions.

“There are more than 7,500 private equity firms out there,” Sinding said in an interview ahead of the industry’s annual SuperReturn International conference in Berlin. “As the industry matures we will see a major consolidation wave leaving us with a dozen global firms and niche players — the rest will be stuck in the middle.”

Sinding said 80% of the dry powder in private equity is being raised by the mega funds and it’s getting harder for smaller firms to compete unless they are very specialized. 

“In recent years, everybody was just about good enough,” he said. “But now you have all this volatility. Things are getting more complicated but size and experience helps to build businesses during a downturn. And investors are asking much tougher questions about performance.”

Bloomberg News reported in August that EQT had raised about €15 billion ($16 billion) for a new flagship buyout fund. The firm expects to close fundraising for the vehicle, which has a €21.5 billion hard cap, this year.

EQT has been one of the most acquisitive private equity firms in Europe over the last three years, striking deals worth more than $40 billion, according to data compiled by Bloomberg. This month it agreed to purchase UK veterinary drugmaker Dechra Pharmaceuticals Plc for almost £4.5 billion ($5.6 billion) in the biggest Europen take-private this year. 

The Swedish firm itself consolidated last year when it bought Baring Private Equity Asia. Another example of the trend has been TPG’s acquisition of credit and real estate specialist Angelo Gordon in May. 

While the industry has survived 5% interest rates before, firms will have to look more closely at capital structure when doing deals, Sinding said. The mentality of grow now and fix profitability later is over, he said.

(Updates with details on EQT fundraising, deals from fifth paragraph.)

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