On Tuesday, Swedish private equity real assets giant EQT announced that they are acquiring global real estate investment firm Exeter Property Group in a $1.8 billion tie-up that will be paid out through $800 million in EQT AB shares and $1.07 billion in cash (including the refinancing of $300 million in current Exeter debt).
In an official statement on Tuesday, EQT said the combination will accelerate its strategic growth ambition within real estate, creating a scaled thematic investment platform with global reach.
EQT will acquire 100 percent of the Exeter management company and 25 percent of the right to carried interest in selected existing Exeter funds (including Exeter U.S. Industrial Value Fund V). Additionally, EQT will be entitled to 35 percent of the carried interest of future funds, which is in line with existing EQT policies
The proposed acquisition price represents an estimated mid-teens EBITDA multiple on a run-rate basis at completion. EQT expects the transaction to be earnings accretive in 2021.
Exeter currently manages $10 billion in client assets across a diversified commercial real estate platform in the U.S. and Europe. The firm, which is majority owned by founder Ward Fitzgerald and the Exeter management team, acquires, develops and manages logistics, industrial, life science, office and residential properties, mainly across the U.S. and Europe.
For the fiscal year 2020, Exeter is expected to generate approximately $135 million in revenues and approximately $80 million in EBITDA (excluding carried interest), adding to an established growth trend that has seen Exeter’s revenues and EBITDA grow at a compound annualized growth rate of 23 percent and 25 percent, respectively, over the past two years.
North America
According to EQT, adding a scaled franchise alongside its own private equity infrastructure strategies will strengthen EQT’s position in North America, an important strategic region for the firm. Post-transaction, EQT estimates that 30 percent of capital raised in 2020 will have been sourced from the region (pro-forma for the combination). Exeter will also bring around 90 existing fund investors to the EQT platform, and more than 60 new clients in North America alone.
Sector-wise, Exeter has a leading position in the logistics and industrial real estate segments in the U.S. and Europe, and is growing rapidly in U.S. life science, suburban office and residential multi-family segments.
Additionally, EQT says Exeter’s investment track record is based on a formula that is (ideally) repeatable and scalable on a global basis, particularly in Asia-Pacific and Latin America, where Exeter is rapidly gaining market traction in the much-in-demand logistics and industrials sub-sectors.
Strategically, the deal will enhance EQT’s ability to provide its investors with a more diverse investment offering, by aligning with an investor whose thematic, value-creation, and decentralized philosophy is compatible with their own.
A high bar
In a statement on the acquisition, EQT ABT CEO and Managing Partner Christian Sinding said that Exeter was one of the few rare acquisitions to pass muster with the Swedish investment firm.
“We have a high bar for strategic M&A, and Exeter is one of the few opportunities we have identified which clears and well surpasses it,” Sinding said. “With its value-creation-focused investment approach, one of the strongest track-records in value-add real estate globally, and importantly, a people-and-performance-centric culture, we are all well-aligned.”
“Scaling EQT’s real estate platform has been a key priority for EQT Real Assets,” added Lennart Blecher, Head of EQT Real Assets and Deputy Managing Partner. “The combination of Exeter and EQT’s existing real estate business is highly complementary and creates a leader in thematic value-add real estate investments, allowing EQT to scale up local execution while also adding a prolific single asset deal platform.
“Exeter is a hidden gem with very strong performance due to a clear operational mindset. We believe this is synergistic for both parties, with EQT able to bring multiple benefits to the Exeter business with the strength of our industry and client relationships and our future-proofed operating platform,” Blecher added.
Saying that day-to-day activities at Exeter would remain “business as usual,” Exeter Founder and CEO Ward Fitzgerald hailed EQT as a “fantastic strategic and cultural fit” for his company.
“We share a similar philosophy and investment approach, and we have a complementary global platform which can accelerate the growth of opportunities that we make available to both current and future clients,” Fitzgerald said.
The transaction is subject to customary closing conditions, including anti-trust and certain fund investor clearances, with completion expected in the second quarter of 2021
