Sweden's EQT to buy Baring Private Equity Asia for €6.8bn

EQT AB has reached an agreement to acquire Baring Private Equity Asia (BPEA), a leading private markets investment firm in Asia with €17.7bn of assets under management. 

The acquisition will see the combined business rebranded as BPEA EQT Asia and the transaction is expected to close in Q4 2022.

EQT said in a statement on 16 March that the combination with BPEA, a leading Pan-Asian private markets firm, provides a step-change to EQT's presence in Asia, and ideally positions EQT to execute on the structural growth opportunity in Asian private markets.

Asian private markets are expected to grow at almost twice the rate of global private markets and investors are set to materially increase their private markets allocations in the region

With an exceptional cultural fit, a strong performance track-record, aligned approach to thematic investing, and a commitment to accelerate digitalization and sustainability, the combination provides an opportunity to leverage the strengths of both organizations to create one of the leading players in active ownership in Asia

Following the combination, EQT will be local-with-locals in 25 countries, representing ~80% of global GDP, thereby creating a truly global platform poised to expand EQT's active ownership strategies across its core markets

The combined Asian Private Capital business will be rebranded as BPEA EQT Asia and will continue to be led by BPEA CEO Jean Eric Salata and BPEA's senior management team

Total consideration of €6.8bn, consisting of 191.2m new ordinary EQT shares, valued at €5.3bn, plus EUR 1.5bn in cash
The combination is expected to be immediately high single digit accretive to EQT's EPS.

Expanding in Asia is a strategic priority for EQT, as the region accounts for more than a third of global GDP today and is expected to contribute 40%+ of global GDP growth by 2030. With 24% CAGR since 2015 and reaching $2.1tn in 2021, Asia is the growth engine underpinning global private markets (compared to 14% CAGR for Europe and North America combined).

This trend is expected to continue as Asian private markets benefit from favourable long-term structural tailwinds. Global private markets firms are increasingly taking share in the underpenetrated Asian private markets, but still only represent 34% of the total market.

With this combination, EQT said it is ideally positioned to take market share in and capitalize on the Asian growth opportunity with its truly global reach and scaled active ownership platform in Asia.

BPEA is a top-three private markets investment manager in Asia with EUR 17.7bn AUM, currently investing from its flagship Private Equity Fund VIII, which had its first close in September 2021.

Operating since 1997, BPEA has built a platform with deep sector-based expertise and a value-driven active ownership approach, investing in mid to large-cap companies in Asia, mainly focused on Private Equity, but also Real Estate and more recently Growth.

With 10 regional offices, BPEA combines local execution with a Pan-Asian reach (236 FTE+ as of 2021), mirroring EQT's local-with-locals approach.

BPEA has made 100+ Private Equity investments since its inception and has a track-record of generating strong returns for its clients, with 2.6x realized gross MOIC since inception. With its deep, long-standing relationships with 300+ clients and best-in-class fundraising ability, BPEA is well positioned to capitalize on the outsized Asian growth opportunity.

The combination represents a step-change in EQT's global reach with immediate Pan-Asia presence at scale and with its thematic investment approach, supporting companies from early stage to maturity, EQT will continue to scale and expand its range of strategies across its European, North American, and Asian core markets and deliver for its clients.

Christian Sinding, CEO and Managing Partner of EQT said: "We are very excited to join forces with BPEA, which represents a step-change in our global reach with immediate Pan-Asian presence at scale. Expanding our footprint in Asia is part of the strategic objectives we set out at the time of our IPO, and BPEA represents a unique opportunity, as a well-established and top-performing firm in the region, to enhance our global platform and position us to capitalize on the structural growth opportunity in Asian private markets.

"With its thematic sector-based approach, strong track-record in value creation, and most importantly, a learning culture and long-term partnership approach, we feel deeply aligned with BPEA. We are truly impressed by what Jean and the BPEA team have built over the past 25 years. A perfect cultural and ideological fit with EQT, and a unique opportunity to establish EQT as a world-leading private markets platform with a scaled Asian platform and truly global reach"

Jean Eric Salata, CEO and Founder of BPEA said: "We are thrilled to embark on this journey with EQT and by the possibilities that this combination creates. It is a game-changer for both our firms and will accelerate our ability to deliver superior returns for our clients.

"The cultural fit between our two firms is remarkable and the strategic fit is very powerful. Combining our strong position in Asia with EQT's world-class capabilities in sectors, such as Healthcare and Technology, their proprietary digital transformation and data analytics resources, and their leadership in sustainability, will create a highly differentiated and extremely competitive private markets firm in Asia and globally.

"The future of Private Equity is about the ability to truly transform companies through active ownership strategies that deliver superior returns to clients throughout the cycle, regardless of the external environment. This combination positions us extraordinarily well to do exactly that at an industry leading-level."

Strategic rationale

Transformative to EQT's presence in Asia: Expansion into Asia was one of EQT's key strategic objectives set out at the time of its IPO. BPEA is the perfect partner and will create a step-change for EQT in Asia

Creates a global leader in active ownership strategies: EQT will become a top 3-player(4) in active ownership strategies globally, and with a scaled Asian platform, EQT now has truly global reach

Strong performance track-record: BPEA's success and scale is reflected through its AUM growth at 25% CAGR (2019-2021) and an outstanding 2.6x realized gross MOIC since inception(5)

Exceptional cultural fit: BPEA's corporate culture is aligned with EQT's core values: high-performing, respectful, entrepreneurial, informal, and transparent. Both firms have grown through a local-with-locals approach, with decentralized decision making and a deep drive to learn and continuously improve

Similar ambitions and approach to future-proofing and value creation: Utilize EQT's Digitalization, Sustainability and thematic investing toolboxes will accelerate the value creation opportunity in Asia

Turbo-charges Real Estate growth in Asia: BPEA Real Estate further extends EQT Exeter's on-the-ground footprint in Asia and positions the platform to continue to scale its business in the region

Clearly identified value creation opportunities: Leverage the combined platform and BPEA and EQT's strong brands to rapidly scale Private Equity, and over time launch EQT's other Private Capital strategies in Asia (e.g., Public Value, Ventures, Life Sciences and Future)

Broader client access: BPEA brings a wide range of high-quality client relationships to the EQT platform, with over 300 existing clients, of which 100+ are new clients for EQT

Highly strategic combination, while being immediately accretive: The Transaction is expected to be immediately high single digit accretive to EQT's EPS

Organizational set-up and governance

EQT Private Capital will have two divisions post-Transaction - BPEA EQT Asia, comprising the combined BPEA Private Equity and EQT APAC Private Equity teams, and EQT Private Capital Europe & North America. Over time, BPEA EQT Asia is expected to provide the full suite of Private Capital strategies, from Ventures through Future, similar to what EQT Private Capital Europe & North America offers today. Salata will become Head of BPEA EQT Asia and will oversee EQT's Private Capital business in Asia, reporting directly to Christian Sinding. Mr. Salata will also join EQT's Executive Committee.

BPEA's Real Estate business will be integrated into EQT Exeter, operating as one global platform. Since the acquisition of the Exeter Property Group in April 2021, EQT Exeter has been growing globally, including into Asia through the acquisition of Bear Logi in January 2022. The combination with BPEA Real Estate will significantly enhance EQT Exeter's local presence across the region.

EQT Infrastructure will continue to operate on a global basis (including Asia) but is expected to benefit from BPEA's strong local footprint to generate increased deal flow.

The combined EQT footprint in Asia will consist of more than 300 FTE+ across 9 regional offices, creating a large-scale Pan-Asian platform. EQT will have more than EUR 20bn of invested AUM in Asia across Private Capital and Real Assets.

Key transaction details

EQT will acquire 100% of the BPEA management company, the BPEA general partner entities which control the BPEA funds, and the right to carried interest in selected existing funds (including 25% in BPEA Fund VI and 35% in BPEA Fund VII)

EQT will invest in and be entitled to 35% of the carried interest in all future funds, starting with BPEA Fund VIII, in line with existing EQT policies

Total consideration of €6.8bn on a cash and debt free basis (with a normalized level of working capital), of which approximately €5.3bn to be paid through the issue of 191.2m new EQT ordinary shares (corresponding to a dilution of approximately 16%), plus EUR 1.5bn in cash

EQT has cash and facilities in place to fund the cash consideration. In addition, EQT may review long-term financing options.

The Transaction is subject to customary closing conditions, including anti-trust, regulatory approvals and certain BPEA fund investor consent approvals, as well as EQT majority shareholder approval at the Annual General Meeting in June 2022, granting the Board of Directors of EQT the authority to issue the consideration shares; major EQT shareholders representing in total more than 50% of EQT's share capital have irrevocably committed to vote in favor of the share issue authorization

The Transaction is expected to close in Q4 2022