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EQT's Eric Liu: Gliding through today's macro instability

Sarah Pringle
Jul 5, 2022
Photo illustration of Eric Liu, a stethoscope and abstract shapes.
Photo illustration: Shoshana Gordon/Axios. Photo: Courtesy of EQT

When it comes to health care investing, EQT partner Eric Liu tells Sarah that despite market headwinds, not much has changed in terms of the Swedish buyout giant's ability to put fresh capital to work.

Why it matters: Inflation, interest rates, a widespread labor shortage and the Ukraine-Russia crisis notwithstanding — not to mention today's public-private valuation disconnect — there's no shortage of macro concerns.

  • Those unexpected factors impact every company, "in a way, we can't fix those problems," Liu says. "Even if you change nothing about the market position, your CEO is the single best source of leverage. They make strategic decisions, fire and hire, and set incentives to modify behavior inside of the company."

What he's saying: "We have to be active because it’s our primary sector," and as a general matter, Liu notes, there are few large-cap opportunities in any given year for those writing multibillion-dollar checks.

"There is only a certain rate at which the market can create scale."

Zoom in: Real success is picking the right spots — "not wasting time on things that aren't going to trade", says Liu, co-head of EQT's global health care efforts.

  • "Everyone moves quickly, everyone moves hard. So you have to be thoughtful and honest with yourself as to whether you’re a better owner than someone. If you’re not, you're probably going to lose."
  • When EQT knows it's the best buyer, the sponsor is willing and able to pay up, he says.

Between the lines: With around $80B AUM, EQT owns fewer companies than your typical large-cap fund. The average EQT partner works with 1-2 at one time, versus 8-9 at other funds.

  • "We're not asset gatherers," says Liu, with a higher-than-average three portfolio companies. "That's not a bad thing, by the way."
  • What it does mean: "It gives you a lot more time to work with your companies," though a smaller portfolio means every investment counts, Liu says. (In other words, you can't afford a loss).

Context: Liu joined EQT in 2014 to build out the Swedish firm's U.S. buyout operations.

  • He led investments in current U.S.-based health care portfolio companies Parexel, Waystar and Certara, and previously led those for Aldevron and Press Ganey.
  • More recently, EQT won the competitive auction alongside Mubadala for Swedish medical freight company Envirotainer at a $3 billion valuation.
  • EQT has about $75 billion in enterprise value invested in 20-plus health care companies globally over the past five years, with health care reflecting ~50% of all capital deployed in EQT VI, VII, VIII, and IX funds.

Liu's bottom line: Although valuations have "been taken a bit to extremes," he says, "you can always find good companies and execute a good value creation plan... I don't think too much about the macro stuff."

Update: This report has been updated with EQT data received after publication.

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