News & Analysis

EQT’s Von Koch: 'use data to prove PE’s worth'

Speaking at PEI’s Operating Partners Forum, Thomas von Koch said PE industry is ‘under fire’ and managers need to ‘future-proof’ portfolio companies.

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The private equity industry should make efforts to quantify the benefits it brings to society, according to EQT managing partner Thomas von Koch.

Speaking at Private Equity International’s Operating Partners Forum: Europe 2015 on Wednesday, Von Koch reiterated concerns he has voiced previously that the private equity industry needs to be more open and transparent if it wants to survive.

“We are under fire. In Sweden we are under immense fire, I think it’s the same in the UK and partly in Holland,” Von Koch said. “Private equity: are we good for our LPs and ourselves only or are we contributing to society, or are we just one of those parasites that shouldn’t be here anymore?”

EQT has conducted a study of the 22 companies that the firm has acquired, developed and sold in Sweden to investigate its performance in the five-year period following divestment. The study found that annual average sales growth during the period was 9 percent, and the average annual increase in employees was 8 percent.

In the run-up to the general election in the UK, such data can help private equity firms demonstrate the value of the industry to politicians and, potentially, prevent adverse policy changes, Von Koch said.

“We need to justify our existence not only to our LPs but also to society in general,” he said.

He added that the private equity industry has undergone “radical change” in recent years, switching from a focus mainly on investors to becoming an important player in society.

“Important as owner and employer, but not least having the responsibility of managing institutional capital [such as] pension funds,” Von Koch said. “With power comes responsibility. We must all behave in a responsible manner to deserve society’s respect. We should always take long term perspectives when acquiring companies, even though we know that we will not remain eternal owners. It’s our responsibility to make sure the company’s future-proof and in shape to continue to prosper after ownership. If we sell bad companies, we will never be successful long-term.”