Breakingviews: EQT’s new boss has a private-credit hole to fill

Per Franzén is taking charge of EQT at a pivotal moment. The Swedish buyout shop is big, with about $140 billion of fee-paying assets under management, but it’s not in the same league as U.S. giants like Blackstone and KKR. The $40 billion company’s biggest gap lies in the racy world of private credit, which EQT quit several years ago. Franzén’s legacy might be defined by whether he manages to reverse that historic decision.

The EQT veteran, who currently runs the firm’s main investing businesses in Europe and North America, will take over in May from boss of six years Christian Sinding, the company said on Monday. The switch came as a surprise to investors, yet there’s a history of similar leadership changes. EQT is a creature of the wealthy Wallenberg family’s Investor AB vehicle, which sent a Swede called Conni Jonsson off to start a buyout shop in 1994. Jonsson, who still chairs the board, appointed Thomas von Koch as CEO in 2014, and then Sinding in 2019. In other words, EQT is in the rhythm of replacing its boss every five or six years.

Sinding’s tenure was marked by a successful 2019 initial public offering and a few key acquisitions, including buying a real-estate investor for $2 billion in 2021 and a $7 billion Asia-focused buyout firm in 2022. Both deals plugged some notable absences in EQT’s footprint. Franzén’s tenure may also involve filling some white space on the map.

Strategically, the group sits between two stools. It’s very different to the employee-owned, buyout focused shops like Advent International or Clayton, Dubilier & Rice – mostly because of EQT’s public listing but also because of Sinding’s push into other assets like real estate and infrastructure. Equally, the firm trails U.S. behemoths in size and scope, particularly after offloading its credit unit to Bridgepoint in 2020. Major players with private-debt offerings – like $60 billion Ares Management, $90 billion Apollo Global Management and $200 billion Blackstone – have seen their price-earnings multiples soar in recent years as investors throw money at the sector, all but wiping out EQT’s historic valuation premium to listed peers.

For Franzén, buying a private-credit shop could help. It’s useful that EQT is already in M&A mode, with Sinding recently hinting at possible targets including so-called secondary investors, which buy pieces of private-capital funds or individual buyout assets. Expanding the net to include mid-sized debt players, like $9 billion London-listed Intermediate Capital, would give EQT a more rounded offering to its investing clients.

Covering the whole waterfront of assets is arguably becoming more important, as managers launch more products targeted at wealthy individuals rather than just institutions. The workaday rich need access to their money more readily, which tends to suit shorter-term credit investments better than lumpy leveraged buyouts. EQT has a good track record of self-transformation. Franzén’s job is to continue it.