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A Buy-out Man Who Bought In

20 February, 2012

In his briefcase, Conni Jonsson is carrying a book of poetry by Tomas Tranströmer, the Swedish writer and recipient of last year’s Nobel Prize in Literature.

While Mr Jonsson admits he is not a big reader, his prizewinning countryman perhaps offers a perfect literary accompaniment to his approach both to his private equity and personal pursuits. Tranströmer’s preoccupations with the beauty of Sweden’s natural landscape serves as a fitting backdrop for Mr Jonsson’s fondness for hunting, mountaineering and skiing in his homeland. And just as Tranströmer has been praised for his accessible depictions of everyday life, so Mr Jonsson is described by colleagues and rivals alike as one of the most down-to-earth managers in a sector dominated by lavish “master of the universe” characters.

Despite spending a large part of his career in finance, the 51-year-old co-founder and chief executive of EQT Partners has adopted more of an industrial approach to its private equity investments – in keeping with the traditions of Sweden’s billionaire Wallenberg family that spawned EQT 18 years ago. Where rival firms might brood extensively about ideal debt structures, Mr Jonsson will first and foremost seek to overhaul a company’s strategy and controls. Typically, a grey-haired industrialist will be installed as chairman of companies bought by EQT and at least two additional industrialists and EQT’s own partners will be brought on to the board.

“I like entrepreneurs,” says Mr Jonsson, speaking in the Stockholm-based firm’s London offices. “I like people who are willing to take risks to create something in every area of society, be it business, sports or politics. But it is also very important that they are not too single-minded. There are extreme entrepreneurs who cause a lot of damage around themselves by being so obsessed with their success.”

One of his aides recalls an incident three years ago when Sanitec, a producer of bathroom ceramics, ran into financial trouble. One of Mr Jonsson’s colleagues suggested letting it collapse rather than agreeing to inject €115m in additional equity. “Conni went through the roof when he heard that. To even spell out that option made him furious.”

Mr Jonsson joined the main investment arm of the Wallenberg family – Investor AB – after starting his career at Robur Mutual Funds, a Swedish equity fund. During his time at Investor AB he absorbed the culture and management style of the Wallenberg dynasty of investors, bankers and philanthropists that dates back to the 19th century and owns stakes in companies such as ABB, AstraZeneca, Electrolux and Ericsson.

Mr Jonsson became part of a network that is deeply ingrained in Scandinavia’s industry – a world that is closer to Sweden’s many assembly plants than to London’s banks. Indeed, Mr Jonsson practically echoes some of the Wallenberg principles when he talks of entrepreneurial flair being combined with a sense of responsibility for society. “We have certain things that are religion for us such as to be [on the ground] and to be involved in stakeholder management,” he says.

Using this extensive network, he set up EQT – which is 31 per cent-owned but not controlled by Investor AB – in 1994. Since then, EQT has become one of Europe’s most successful private equity groups. It does not disclose its performance, but its recent fundraising speaks for itself. While many other buy-out firms have been struggling to raise fresh money, Mr Jonsson and his team last year took less than nine months to raise a €4.75bn pool of capital. That success, combined with a management style so aligned to that of Investor AB’s, has meant that the latter’s chairman, Jacob Wallenberg, has never felt the need to shorten the arms-length relationship between the two groups.

Of his own family – he has a wife and three children – Mr Jonsson says: “My family gives me flexibility and I give them time back.”

Indeed, being removed from the world of private equity when he is out of the office has been instructive. “The way I think about checks and balances in how to run a company is also the way I think about it in my personal life,” he says. “You need to have people with different backgrounds and diversity around you.” Then he adds with a smile: “I have always had a mixed group of people around me who make my life miserable by always speaking against me.”

From its origins as a Nordic buy-out group that solely acquired companies, Mr Jonsson has expanded EQT geographically – into Germany and eastern Europe – and widened its investment scope towards other assets such as growth capital, debt, distressed companies and infrastructure. EQT’s investors, while full of praise for the calm and unobtrusive chief executive, are concerned that he might have lost his way by rapidly diversifying the group. “We are concerned if they will be able to cope from a management perspective,” one large investor in EQT’s funds says.

Mr Jonsson insists his strategy has nothing in common with the diversified investment-management model of global private equity groups such as Blackstone or Carlyle. “We are not an asset manager,” he says. “Our platform is there to support the business units and not the other way round.”

And since he does not consider himself to be part of it, he is critical of the private equity community.“I would say with very few exceptions the whole industry has been dominated by a short-term approach. You just have to look where they come from – finance.”

While all the industrialist talk sounds agreeable, some might call it disingenuous for a man who works in the business of buying and selling companies and who has personally made millions from it. As for EQT’s long-termism, the firm came under harsh criticism in Germany during the credit bubble years when it used debt to buy Tognum, an engine maker, and listed it after only 18 months at an eye-watering profit of 45 times the initial equity investment.

Mr Jonsson is quick to admit he has played a part in the same game that he likes to criticise. “Our mandate is to make money – so if we are able to make money quickly we will do it.” In fact, when asked about the best decision in his career, he does not pause to respond: To buy Tognum.

He is equally straight about his biggest mistakes. He says he sometimes has not been ruthless enough when someone’s performance, while not catastrophic, has been far from stellar. “The toughest thing is to deal with people that we call ‘70 per centers’,” he says. “These are the people that have all the right answers and logical and intelligent excuses. But they don’t really get it right. To then have the self-confidence to change that person early enough – that is the hardest part and that is where I have made the most mistakes by giving them too much time.”

Looking back at EQT’s inexorable rise from small buy-out firm to European private equity powerhouse, this is not a criticism the Wallenbergs are likely to level at Mr Jonsson.

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A Buy-out Man Who Bought In

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