EQT launches in Japan as part of regional buildout

The Europe-headquartered GP has opened an office in Tokyo and is in the process of building a local team, which will be complemented by existing resources within the global network. The EQT-JIP relationship is not fully binding – each firm is free to pursue deals independently in Japan – but they will collaborate on sizeable investment opportunities that involve global expansion.

JIP – which raised JPY148.5 billion ($1.4 billion) for its latest fund in 2018 – is known as a corporate carve-out specialist. However, EQT will target the full array of Japan buyout opportunities, looking to bring its global sector expertise in healthcare, technology, media and telecom, and services to bear, as well as its functional capabilities.

“We are very sector-focused and we have a very strong digital capability. When we think about what we bring in terms of the digital angle, Japan is an interesting market because there are many Japanese companies that are not leading when it comes to digitalization. We also have this strong push globally in terms of having a positive impact regarding sustainability. That’s another theme we can use and complement what JIC has locally,” said Simon Griffiths, head of Asia Pacific private equity at EQT.

Global buyout firms are devoting more resources to Japan in the expectation of increased large-cap deal flow, with Bain Capital recently becoming the second international player – after The Carlyle Group – to raise a dedicated Japan fund. Griffiths noted that EQT’s industrial heritage might resonate in a country where historically there has been some skepticism regarding a purely financial approach to investment.

“A lot of our success in the rest of the world has been around picking teams and sectors where we are strong and going deep,” he said. “We have to pick our fights where we are strong and recognize where we can be the best owner, but we are confident when it comes to Japan there is a very strong fit with EQT’s heritage and values.”

Griffiths spent seven years with EQT in Southeast Asia until 2015 and re-joined the firm last year with a remit to expand the private equity operation in Asia. EQT’s strategy for the region has been classic middle-market and skewed towards China and Southeast Asia. Those geographies account for eight of the nine deals in the firm’s Asia mid-market fund, which closed at $800 million in 2018.

However, EQT has grown considerably in recent years and now claims to be among the three-largest independent private markets investors globally. In 2020 alone, assets under management increased 46% to EUR52.5 billion ($63.5 billion), supported by the firm’s latest flagship private equity and infrastructure funds. The former had raised EUR14.6 billion by year-end against a mooted target of EUR14.75 billion.

CEO Christian Sinding said in his latest year-end report that the team had spent part of 2020 “evaluating and preparing for new investment strategies, including what we’re going to do in Asia Pacific and for potential long-hold funds.” He identified Japan as the next target.

An Australia office opened last year, but it was largely driven by the infrastructure team. Griffiths – who led EQT’s first Australia investment in radiology provider I-Med in 2014 – has since recruited some local private equity executives. Frank Heckes and David Forde, both partners at Archer Capital, were announced as joint heads of Australia and New Zealand private equity in October.

“We want to grow in the region and really bring the best of EQT to bear in the region, which historically we haven’t had the bandwidth and resources to do. In private equity, we are growing in these two new geographies [Japan and Australia], and we are making additions in China and Southeast Asia. We will get to India and South Korea soon,” Griffiths said.

Bringing the global EQT model to Asia means being more thematic – a narrower sector focus and a bulked-up portfolio support team. The former CTO of Spotify will lead portfolio support operations in Asia. It also means writing larger checks. Traditionally, the firm has made equity commitments of $50-100 million in Asia. That will become $100 million and above, with a sweet spot of $100-300 million investments in the upper middle-market space.

Griffiths declined to comment on the firm’s fundraising plans. However, he noted that EQT has a substantial amount of capital at its disposal and a track record of pooling capital from different funds into individual deals. An example of this is the 2018 acquisition of BBS Automation, a German industrial manufacturing business with a sizeable footprint in China.

Another characteristic of EQT’s global expansion is pushing out across multiple strategies. Private equity might be the first area of interest for the firm in Japan, but it won’t be the last. “Over time we think Japan will be extremely interesting for our other strategies, whether that’s infrastructure, growth, venture, real estate, or public value, our friendly activist business,” Griffiths said. “We think those would fit well in Japan as well.”

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