eQ has been investing in the Northern European lower middle market for more than 25 years. Over this time, we have built deep relationships with many of the region’s leading private equity managers and developed extensive knowledge of the companies, sectors and transactions in which they invest. Co-investments are a natural extension of this platform, providing selective direct exposure to individual companies alongside managers we know well.

Our co-investment strategy was launched based on our more than ten-year experience of executing direct deals and brings this approach together in a dedicated co-investment strategy focused on growing and profitable Northern European lower middle market companies.

We believe the Northern European lower middle market offers an attractive combination of resilient, profitable businesses and significant value creation potential through operational development, international expansion and add-on acquisitions.

From access to selection

High-quality co-investment opportunities are rarely broadly available. Managers typically offer them to a limited group of trusted investors that can evaluate opportunities quickly and reliably execute within tight transaction timelines. This is where eQ’s long-standing manager relationships become particularly valuable. With active relationships with more than 100 Northern European lower middle market managers, we have broad access to co-investment deal flow and often know the manager, its team, strategy and track record well before an opportunity reaches us.

Access alone, however, is not enough. Our approach to co-investing is highly selective. Since the beginning of 2022, more than 250 co-investment opportunities have originated from our existing manager network while only 15 investments have been completed.

For every opportunity, our co-investment due diligence focuses on five key investment criteria:

• manager quality and investment fit,
• industry attractiveness,
• company quality,
• value creation potential, and
• deal structure.

Each evaluation is conducted by a dedicated deal team combining co-investment expertise with the broader private equity team responsible for manager selection, bringing deep knowledge of the manager, its key individuals, investment approach and track record.

Building a diversified portfolio of high-conviction investments

Our objective is to combine broad access with disciplined selection by building a diversified portfolio from only those opportunities where we have strong conviction in both the manager and the company. We build diversified portfolios of 15–20 high-quality lower middle market companies across different managers, sectors, geographies and value creation strategies. We primarily invest alongside managers with whom we have an existing investment relationship. However, transactions sourced from independent sponsors and other industry players are also of interest. 

Since 2016, eQ has completed 20 co-investments alongside leading Northern European lower middle market managers. Co-investing has been a systematic part of our Northern European strategy for several years.