Business Breakdowns
· Sean Barrett
[00:00:00] S1: They have four strategies. We're actually tremendously excited about all four of them and they're really great franchises. So stop me if anything becomes interesting, but the first strategy is private equity, Europe and Americas. So that's Asia. It's about 50 billion euros of fee-paying AUM and again they invest behind thematic sectors. So it's a lot of healthcare and tech within that strategy. That's most of the strategy if you really break it down. And I think they're trying to find important tech and healthcare companies of the future, usually leaders in their markets, but businesses that need some help, future-proofing and growing to get into that inflection and hit the next level of their growth. I think a good case study, for example, would be IFS, which IFS is a leader in industrial software or software that helps companies manage their assets and people. It's effectively an ERP software company for capital-intensive industries. This was a publicly traded company 10 years ago that nobody really cared too much about. It was doing a few hundred million of revenue. It was on-premise software, it was growing single digits. EQT took it over and really got to work. I think they had the vision that this was a great market and they got to work on future-proofing the company. So what did that mean here? That meant switching the company, replatforming the business into a true cloud provider. And today that business is doing 1.2 billion euros of ARR, growing 30-plus percent with EBITDA margins of 30-plus percent. So think about that as a transformation. That is not your old boring private equity playbook. That's taking a business at 300 million of revenue, growing single digits, 4x-ing the business and taking revenue growth from single digits to 30%. It's really impressive. And that's the playbook at EQT.
· Matt Reustle
[00:00:00] S0: Guessing somewhere in the one to $3 billion range. In terms of the acquisition size, is that in the ballpark of what they're normally buying? How much does that vary just in terms of the size of what they're doing when they deploy capital?
· Sean Barrett
[00:00:00] S1: Yeah, we think a lot of their check sizes end up being in the flagship fund, end up being in that 500 million to one and a half billion euro range. On the very high end, their most recent fund was 22 billion euros in private equity. That's one of the bigger private equity funds in the world. And within that they also have the ability to tack on co-invest. So if they have a need for more capital, they can tap their partners and the partners can help with co-invest. It's also something that big LPs really like. They view that co-invest as an opportunity to bring down the blended fee rate and it's good partnership. On a side note, it's also a reason that we're comfortable that EQT can continue generating great returns at larger and larger fund sizes. Because if you look back over the last five or ten years, yes, their flagship fund has doubled in the last seven years, the fund size has doubled. But at the same time they use so much co-invest along the way that they've actually been investing more and more over time, bigger dollars over time and then they've done a really good job with returns. So the private equity business has generated a 21% net IRR historically for investors. EQTerians, they like to call themselves performance gatherers, not asset gatherers. But if you keep generating 21% net IRRs for your investors, they will happily give you more and more money. And that's why this business has grown so quickly.
· Matt Reustle
[00:00:00] S0: Yeah, one certainly leads to the other. That is the case. I interrupted as we progressed through some of the strategies so we can push on.
· Sean Barrett
[00:00:00] S1: Yes. So EQT Asia, this is a strategy that we're really excited about. EQT Asia manages about 25 billion of fee-paying AUM if you include the most recent fundraise in 2025. And EQT acquired this business in 2022. It was formerly the Baring Private Equity Asia business. So everyone refers to this business as BPEA, but it's a fantastic franchise that's been generating great returns for investors for almost 30 years. Almost half of EQT Asia's business is in India and they have effectively no China exposure. But the India market is really attractive. It's growing GDP 6 to 8% per annum. And EQT is buying tech and healthcare leaders in that market that can typically grow revenue 15 to 20%. The interesting thing about India, it's really underpenetrated from a private equity perspective. It's actually a very small private equity market. EQT, we think has a 10 or 20% market share of that private equity market in India. So they've established themselves as a leader. But you really need people on the ground. If I think back actually early in my career, 10 or 15 years ago, I was looking at a couple software businesses in India that I thought were quite interesting and attractive. And I actually called a friend who's been investing in operating businesses in India for at this point, 30 years and I said, hey, you know, here's some interesting businesses. What do you think I should do? He says, don't do it. He says, you're going to get your face ripped off. You can't invest in India sitting in California. You need people on the ground. You need to know the players, you need to know what's going on on the ground. And it was really good advice that he gave me. But it's even more impressive looking at what EQT has done. They've just created an unbelievable business. They've got a great team, I think a repeatable process to find great businesses there. So when you think about what EQT Asia is doing, think IVF businesses in India, underpenetrated market, big impact on society. Nice long-term grower. Or Nord Anglia, which is an education business they actually took private almost I think 17 years ago and they've owned off and on since then. But they've expanded that business into India and it's a great case study. I think they've actually grown revenue 10x in that business since they bought it. And more importantly, Nord Anglia has a 96% student retention rate.
· Sean Barrett, Matt Reustle
40% of its students go to top hundred universities globally after graduation. So it's had a great impact on society, but it's also made EQT investors a lot of money along the way. And I think that's what EQT really is known for. It's like great impact and great returns. [00:00:00] S0: Is the purchase of Baring's business, was that unique to that specific situation? Or is that something that they use as strategic tool to expand into new strategies?