We are looking at Europe today. Why? Two reasons: one because it’s Labor Day and two, because for the second time in a month a big European firm has unveiled plans to raise primary capital through a stake sale. EQT posted its intention to list on Nasdaq Stockholm this morning, aiming to raise €500 million in primary capital as well as a sale of shares by existing shareholders. Around 20 percent of the firm’s share capital should end up publicly traded.
Why would any private markets firm list in this day and age? Three deep-pocketed financial investors – Dyal Capital Partners, Goldman Sachs’ Petershill Funds, Blackstone Strategic Capital Holdings – are queuing up to back credible platforms. BC Partners, which in early August unveiled an investment from Blackstone’s fund stakes unit, would attest to that. It reportedly raised €500 million for the sale of a stake of between 10 and 15 percent, and tied itself to a shareholder that can open doors for its nascent real estate and credit businesses.
Listing brings with it challenges that for many managers are not worth it. As Anthony Tutrone, head of alternatives for privately held asset management heavyweight Neuberger Berman (which also owns the aforementioned Dyal), recently told PEI‘s Carmela Mendoza: “There are going to be decisions where you have to decide who’s more important, the public shareholder, or the investor? You have a responsibility to both. I am very happy we do not face these challenges.”
But as these deals are about more than just capital. EQT talks in its press statement about creating “a more transparent governance structure,” as well as raising its profile: two things a private sale does not do.
On a related note: 35 percent of recent funds studied by law firm MJ Hudson had a GP commitment of more than 3 percent of the fund size (full report here). This note from lawyers at Skadden, Arps, Slate, Meagher & Flom gives some background on how the GP commitment is structured.
Enjoy the holiday.
Email prepared by Toby Mitchenall.