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The Wallenbergs know a thing or two about portfolio diversification. The family’s background is Swedish industry. But they also founded EQT, Europe’s biggest private equity group. On Monday this revealed plans to list German software group Suse in Frankfurt at a mooted valuation of more than €6bn.
It is the latest flurry from EQT, whose own shares have tripled since a 2019 listing, valuing it at more than $30bn. The buyout group recently bought FirstGroup’s US bus business while abandoning plans to float Europe’s largest veterinary service IVC Evidensia.
EQT hopes to raise $500m from a Suse stake sale to pay down debts and fund further growth.
Suse’s version of open-source operating system Linux allows enterprise software customers to launch and run applications across a variety of hardware. The “written-once, run-anywhere†mantra means greater speed and efficiency for cloud-based applications. Suse’s acquisition of Rancher Labs last year advanced the strategy.
EQT paid Micro Focus $2.5bn for Suse in 2018, eight times trailing revenues. The struggling UK technology group had bought Suse as part of its takeover of The Attachmate Group in 2014.
The acquisition by EQT was initially judged overpriced. That was until IBM acquired market-leading competitor Red Hat the following year for $34bn, a 10 times multiple.
Since then, valuations have stretched even further. A peer comparison suggests Suse might fetch an enterprise value of 13 times trailing sales. Some premium should probably be granted for Suse’s 98 per cent recurring revenues and 19-month average contract period.
Indeed, Germany’s TeamViewer, one of the few comparators listed in Europe, is growing similarly and trading at a 17 times multiple. A 15 times multiple for Suse would equate to an enterprise value of almost €7bn ($8.2bn), including €500m or so of net debt.Â
EQT plans to continue growing the business. The public offering should give public investors a way into a relatively obscure tech segment. The mooted price for IVC Evidensia spooked London investors. EQT will hopefully show greater restraint in bringing Suse to the Frankfurt bourse.
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