Swedish buyout group EQT plans to sell stake in €15bn software group IFS

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Swedish private equity group EQT plans to sell a minority stake in the €15bn valued software group IFS, as buyout investors search for creative ways to return cash to their backers, say people familiar with the matter.

Founded in 1983, IFS was delisted by EQT, one of the world’s largest buyout groups, from the Stockholm stock exchange in 2016. Since then, it has grown by providing software to large businesses including via acquisitions.

While private equity firms typically seek to offload assets after a few years either through an initial public offering or sale, higher interest rates have made that more challenging.

A prolonged slowdown in new listings and takeovers has prompted fund managers to become more creative, such as selling slices of a business and bringing in new investors, in order to return capital to their backers.

EQT’s move would parallel steps taken by other buyout groups with larger assets as they face pressure from their own investors for cash after being forced to hold on to their assets longer than planned.

Notably, Hg brought in new investors to its software group Visma last year at about a $20bn valuation after acquiring it in 2006 for an estimated $500mn.

A minority stake sale would allow EQT to cash in some of its holding in the company even at a time when higher rates have made it more difficult to sell large companies or return them to the public markets.

Since its takeover, EQT has held on to IFS while transferring stakes of the company within its own investment vehicles and bringing in new minority shareholders.

Four years ago, EQT transferred IFS within its funds while bringing in the private equity group TA Associates as a new minority investor in a more than €3bn deal.

And two years ago, EQT sold a stake in the group to the technology investment group Hg.

EQT is in the early stages of planning another minority stake sale that could come next year, said people familiar with the matter, who cautioned that no final decisions had been taken.

The stake sale could give the company an enterprise value, which includes debt, of about €15bn, they added.

EQT’s IFS has grown since its founding by five university friends to about 6,500 staffers across 80 countries. Its customers include groups such as Thyssenkrupp and Molson Coors.

IFS generated net revenue of more than €1bn for its 2023 fiscal year, in its latest annual results. Software revenue rose 33 per cent on the year to €853mn.

EQT, which has about €242bn of assets under management, raised a €22bn buyout fund this February, the largest in its 30-year history.

EQT declined to comment. IFS did not respond to a request for comment.