Society is making increasingly higher demands on companies and organizations with which it interacts. Can they be trusted to look after the wellbeing of their employees or those of their suppliers, to protect the environment, to prevent corruption and to inform both shareholders and other stakeholders according transparently? Legislation increasingly forces companies to comply with these wishes and requirements. The smart software of EQS helps them with complying and proving that they do. Thousands of clients, amongst whom L’Oréal, SAP, VW and recently the biggest luxury conglomerate LVHM, rely on the European market leader for regulation technology (RegTech) to build trust. CEO Achim Weick offers us a look behind the scenes.
You founded the company in 2000. Why?
“In 1999 and 2000 there were a lot of IPOs in Germany and people started to invest in the stock market. From experience – working in investment banking at that time – I knew companies struggled with the mandatory communications associated with an IPO and with shareholders in general. They could use help and I was going to provide that. With a small group of angel investors we developed an integrated cloud-based software platform, the EQS COCKPIT, offering everything that is needed for investor relations management such as newswire, webcasting, websites, shareholder management and filing to financial market regulators: in short we offered them tools to create transparency. With the acquisition of DGAP, a daughter company of the Deutsche Börse we became the number 1 in German speaking markets, covering 90%.”
Once you are market leader in IR-software products for listed companies in the DACH-region there is no room for growth left?
“Our home market did not only not grow but became smaller due the financial crises in 2008 that led to a lot of delistings. We reacted by going international, acquiring companies and setting up offices in major financial centers. Not only in Europe, in the UK, France and Spain for instance, but also in the US, Hong Kong, India and Russia. More importantly, in 2017 we expanded to a broader range of compliance management services when the EU decided more compliance regulations and laws were also to become applicable to non-listed companies, so we were opening a much bigger market.”
EQS’s most important and promising product right now is Integrity Line: a whistleblower software tool.
“The EU Whistleblower Directive requires member states to provide whistleblowers working in the public and private sectors with effective channels to report breaches of EU rules confidentially, establishing a robust system of protection against retaliation. Integrity Line offers a system that ensures reports from whistleblowers are treated anonymously and securely, 24/7 digital, via chat or telephone in more than eighty languages. All member countries were obliged to translate the European directive into their national laws the by the end of 2021. Finally, by July 2023 almost all member states have a law in place now. The laws apply to companies with more than 50 employees, public institutions and municipalities with more than 10.000 inhabitants. This leads to a strong increase of interest for our Integrity Line: we see the number of clients rising steeply every month and expect this will continue for at least the next 12 months. ”
EQS became successful in part because of an international buy and build strategy? Is this still the way to move forward? And is integrating these acquisitions a challenge? Different countries have different cultures.
“It is difficult to scale without acquisitions because whistleblowing software is very sticky. Compliance is about sensitive data and companies don’t want to change providers they trust, but they do stay after their provider is integrated in our platform. So yes, this is still an important part of our strategy. Of course, it’s always a challenge to integrate acquisitions, but this more a technical than a cultural challenge. The compliance software vendors all have the same mind set and are all purpose driven. We want to play a role in making the world a better place by increasing transparency and integrity.”
EQS had a Russian subsidiary. Was it a blow the company when you had to close it down because of the sanctions when Russia started the war against Ukraine?
“We were the number one provider of IR-software for Russian companies. But it took us many years to build up the business from scratch. So it was very painful when we had to close our Russian entity. We had to let go of all our dedicated and hard-working Russian colleagues. It did not really affect EQS as a whole and share prices were not affected by the war, although they were affected by rising interest rates, but from a human point of view it was very sad to have to say goodbye.”
How is EQS itself doing in Investor Relations? How is your relationship with for instance bigger shareholders like Teslin?
“We have several larger shareholders; I am the second biggest myself and several other board members also are shareholders so in that role we have a personal stake in the company’s well-being as well. Teslin became an investor in 2022 when EQS issued new shares. I am very impressed with them and their due diligence. They spoke with competitors, clients, researched the product – market fit and have extensive background knowledge of ESG. We can learn from them. They understand our strategy and can support us with our growth plan.”
Speaking about shareholders: At the moment EQS Group is listed at the Open Market Frankfurt stock exchange. Are you planning to get listed on the regulated Prime Standard stock exchange?
“We are listed at a less regulated stock exchange than the Prime Standard. In theory the trading volume would be higher if we uplisted because institutional investors are restricted to invest in the Open Market. For the uplisting we would need to invest quite heavily in financial control to get there and we have no assurance that we will really get more investors once listed at Prime. Having said that: at some point it will be a no-brainer, it is just a question of the right timing.”
As to governance: EQS recently appointed a new Non-Executive board member?
“We were happy we could further strengthen our Non-Executive board with independent members. Stephan Ritter, Chief Innovation Officer at Arcadis, joined this year and Catharina van Delden, an experienced tech investor, and Kerstin Lopatta, a professor of Financial Accounting, Auditing and Sustainability the University of Hamburg joined last year. They bring a lot of relevant knowledge and experience with them.”
What are the next steps for the company?
“We defined three major growth steps. The first is ‘land grabbing’: attract as many whistleblower software clients as possible. The second is up and cross selling other compliance software application provided on the COCKPIT. And the third step is expanding in the broader ESG-field, concentrating more on the E and S since we are already exceptionally good in the Governance field and can become much bigger in the Environment and Social field. Investors, consumers and – most recently - regulators are increasingly expecting companies to practice due diligence in relation to potential violations of human rights and environmental laws in their supply chains. We can offer the right tools. And then there will be the CSRD, the European sustainability reporting directive.”
What is the essence of EQS’s compliance tools? Helping companies to comply with an increasing number of laws and regulations by ticking all the bureaucratic (EU)boxes?
“Probably needless to say that I don’t think compliance is about ticking the boxes. It is about integrity. Some companies might see some of the legal requirements as a nuisance or a ticking-the-boxes task, like ‘only’ having every supplier signing a code of conduct, but this will lead to scandals and pressure from their clients which will hopefully be a strong motivating reason for taking due diligence seriously. But a lot of companies are intrinsically motivated to do everything they can to prevent damage to the environment or violating human rights. This is my own intrinsic motivation as well. I have worked in a toxic environment in investment banking and saw there was no drive for fighting for anything else than your bonus. I want to create cultural environments based on transparency and integrity and thus trust. That goes for EQS and our people as well.”
From founder of a start-up, you in 2000 you became youngest CEO of a listed company in 2001 and now you are leading a well-established company with 600 professionals and offices in the world’s key financial markets. Some theories say you need different types of leaders for different phases.
“I often ask myself: Am I still the right man in the right place? I would of course no longer be here if I thought the answer was no. We are continuing to build. During the last years we focussed on growth and we see still see many possibilities to grow so we will keep investing in expanding the business but at the same time we are going to focus more on increasing profitability.”
This is an advertisement. Gerlin Participaties is included as an investment institution in the register maintained by the Dutch Authority for the Financial Markets. The tradability of the participation rights in Gerlin Participations is limited because Gerlin Participaties is a closed-end investment institution. For more information about this risk, please refer to Gerlin Participaties' information memorandum and the essential information document.
