EQT Partners has changed its corporate structure in a bid to become more open and transparent.
The Swedish-headquartered firm will bring all its various funds onshore under a new holding company called EQT Holdings, following its decision last year to manage all funds established in 2012 and onwards onshore in Europe. Among them are its maiden debt vehicle, EQT Credit, and its successor which is in market at the moment.
The holding company will have “a very classical Swedish governance structure”, with an independent board, Conni Jonsson, the firm’s managing partner, said during a call with journalists. “It will pretty much operate the way any normal Swedish corporate would do,” he said, noting it was time for the private equity industry to update its practices. “Most of the firms run around in the way they have done for more than 20 years. And what we have realised is that the industry needs to become more of a 'normal' industry.”
Led by Jonsson, the holding company will be 81 percent owned by EQT’s partners and 19 percent by Investor AB, a Swedish investment company that has backed EQT since its founding. Investor AB will exchange its current 31 percent stake in EQT Partners for the ownership stake in EQT Holdings.
Moving its funds onshore will not impact returns or tax that investors have to pay, he said. However EQT anticipates the change will result in a slightly bigger tax bill for itself – “maybe a couple of million more”, Jonsson said. “We have always paid 30 percent tax. But this enables us to operate with the existing tax regimes where we are based. All other private equity structures have been trying to avoid paying tax; we pay the tax that we are expected to pay.”
While the Swedish authorities have been threatening to increase taxes related to private equity in recent years, Jonsson insisted the new structure was not meant to appease policymakers. “We don’t see this as a way to please the tax authorities; we see it as beneficial for the future of our business. If they think that we are doing something that will make it easier for them to decide on what to do going forward, that’s fine,” he said.
Jonsson noted the move would support future growth and help EQT to become an even more trusted owner, better able to communicate with stakeholders, including the nearly 600,000 people employed across its portfolio. This latter point was in part being addressed with the launch Tuesday of a new EQT website with a focus on portfolio companies. The firm also released a portfolio update, noting that in 2012, despite the weak economic climate, its portfolio companies' sales grew by 11 percent on average with EBITDA improving 10 percent. EQT also said its funds distributed €2.1 billion back to investors last year.
EQT has always been a relatively open firm, Jonsson said during the call. “From that perspective it is not 'new'; we are coming from a society where we work with unions and we are very open and transparent in this country.”
He said in a statement that the firm's overall ambition was “to secure trust and demonstrate co-operation with all stakeholders in addition to delivering good returns to EQT’s investors. In the future, we would like it to be possible to establish EQT funds also in the Nordic countries.”