EQT: Private Equity with a Purpose

• Date: 01 September 2020
• Published date: 01 September 2020
• Author: Robert G. Eccles,Therése Lennehag,Nina Nornholm
• DOI: http://doi.org/10.1111/jacf.12419

IN THIS ISSUE:

Private Equity

and Public

Companies

VOLUME 32

NUMBER 3

SUMMER 2020

APPLIED

CORPORATE FINANCE

Journal of

8Private Equity: Accomplishments and Challenges

Greg Brown, University of North Carolina; Bob Harris, University of Virginia; Tim Jenkinson,

University of Oxford; Steve Kaplan, University of Chicago; and David Robinson, Duke University

21 Private Equity and Portfolio Companies: Lessons from the

Global Financial Crisis

Shai Bernstein and Josh Lerner, Harvard University; and Filippo Mezzanotti, Northwestern University

43 Board 3.0: What the Private-Equity Governance Model Can Oer

Public Companies

Ronald J. Gilson, Columbia University and Stanford University; and Jeffrey N. Gordon,

Columbia University

52 e Growing Blessing of Unicorns: e Changing Nature of the

Market for Privately Funded Companies

Keith C. Brown and Kenneth W. Wiles, University of Texas at Austin

73 EQT: Private Equity with a Purpose

Robert G. Eccles, University of Oxford; and Therése Lennehag and Nina Nornholm, EQT AB

87 Private Equity and the COVID-19 Economic Downturn:

Opportunity for Expansion?

David Haarmeyer

92 University of Texas Roundtable on LP Perspectives on the

State of Private Equity

Panelists: Chris Halaska, Memorial Hermann Health System; Tom Tull, Employees Retirement

System of Texas; Russell Valdez, Wafra; and Shelby Wanstrath, Texas Teachers Retirement System.

Moderator: Ken Wiles, University of Texas at Austin

100 Columbia Law School Roundtable on Public Aspects of Private Equity

Panelists: Emily Mendell, International Limited Partners Association; Chris Cozzone, Bain Capital

Double Impact; and Donna Hitscherich, Columbia Business School. Moderated by Aamir Rehman,

Columbia Business School

108 A CEO’s Playbook for Creating Long-Term Value: Ten Essential

Resource Allocation Practices

Harry M. Kraemer, Jr., Northwestern University; Michael J. Mauboussin, Counterpoint Global;

and Alfred Rappaport, Northwestern University

118 A Tale of Leadership in Value Creation

Greg Milano, Fortuna Advisors

128 What Public Companies Can Learn from Private Equity Pay Plans

Stephen O’Byrne, Shareholder Value Advisors

73

Journal of Applied Corporate Finance • Volume 32 Number 3 Summer 2020

The purpose of EQT is to “future-proof companies and make a positive impact”—in every

way it can. For EQT, future-proong means anticipating what companies need to do to

remain relevant and resilient, and to continue to prosper after EQT has sold its position.

Both sustainability and digitalization are at the core of how EQT works with its portfolio

companies. EQT is also future-proong itself through “constant challenging of norms and

ways of operating to become a better employer, advisor, business partner, and citizen.”¹

Given the challenges facing the private equity industry today—challenges that threaten

its very license to operate—the impact model developed by EQT may well offer a guide to

future-proong the entire private equity industry. Although we think EQT’s future-proong

model is particularly valuable for the largest, multi-asset global PE rms, especially those

that are listed companies themselves, aspects of the model can be adopted by smaller

regional and sector-focused funds.

longer than average holdings for public company stocks.³ e

PE industry has grown enormously over the past 20 years,

from roughly $650 billion in assets under management

(AUM) in 2000 to almost $5 trillion in September 2019 (of

which some $1.7 trillion is now “dry powder”), an increase of

16% from the prior year and a more than seven-fold increase

from 2000. In comparison, the Dow Jones Industrial Aver-

age has not even tripled over that period, even when using its

peak before the COVID-19 induced crash.

3 For stocks traded at the NYSE in 2018, MFS White Paper, “Lengthening the In-

vestment Time Horizon,” November 2019.

4 Preqin Ltd. as of May 20, 2020. Preqin’s denition of Private Equity includes

buyout and venture capital strategies.

5 S&P Capital IQ.

“My vision for EQT is to be the best owner in the world.”

– Conni Jonsson, Founder and Chairperson, EQT

by Robert G. Eccles, University of Oxford; and Therése Lennehag and Nina Nornholm, EQT AB

EQT: Private Equity with a Purpose

The Private Equity Industry Today

e PE industry started as an exercise in nancial engineering

with the leveraged buyouts of the late 1970s and 1980s—

transactions in which leverage and restructuring played

important roles in producing eciency gains and high returns

on capital. e industry today has become far more complex,

as the term “private equity” has come to encompass private

debt, real estate, and infrastructure, as well as its long-time

mainstay venture capital. For PE narrowly dened, median

holding periods now average about ve years,² and thus much

1 EQT Annual Report 2019, p. 42.

2 For US buyout deals, PitchBook, 2019 Annual US PE Breakdown, p. 15.

1 EQT Annual Report 2019, p. 42