Following the completion of Second Cinven Fund, announced in early May, the UK buyout group has a formidable GBP1.5 billion (ecu 2.2 billion) of new capital available for investment, consolidating its position as one of Europe’s most prolific buyout investors.
When its second fund-raising effort was announced, Cinven publicized a GBP450 million target, excluding monies from its segregated clients. The group closed its first LP fund, totalling GBP300 million, in November 1996 and invested that capital in a 30:70 ratio alongside commitments from three segregated pension fund clients – British Coal, Barclays Bank and the Railways Pension Schemes. Cinven’s fourth pre-existing client, Royal Life, chose to become an LP in Cinven’s first fund.
This time, however, the group appears to have opted for a slightly different format, with the three major clients participating as LPs in Second Cinven Fund. “The fund incorporates a number of LP structures, with Barclays, British Coal and the Railways Pension Schemes included within that framework”, said deputy managing director John Brown. He declined to specify how much the three long-term Cinven backers had committed and pointed out that Cinven’s objective all along was to line up a GBP1.5 billion pool of new capital.
Thus, Second Cinven Fund and Doughty Hanson’s latest vehicle, which raised $2.5 billion last year, rank as Europe’s two largest buyout funds.
In all, 50 investors participated in Second Cinven Fund, effectively doubling the group’s investor base. The line-up included more than 90% of the LPs in the first fund and 25 groups that are new investors with Cinven. Commitments from the UK and Continental Europe account for 60% of the fund. The balance was drawn from North America and the Middle and Far East.
Around 75% of the first fund was invested in the UK and 25% in Continental Europe. John Brown said the split for Second Cinven Fund, although it may include a slightly greater proportion of non-UK investments, is unlikely to be radically different; final portfolio distribution, however, will “naturally depend very much on the size of individual deals”.
The Second Cinven Fund is targeting deals with a minimum total transaction size of GBP50 million but, judging by current form, its average investment is likely to be much larger. The two largest deals from the first fund were Generale de Sante/General Healthcare Group, totalling GBP1.1 billion, and IPC Magazines, valued at GBP860 million.
The recently announced GBP1 billion acquisition of the packaging interests of KNP of the Netherlands by a Cinven/CVC consortium ranks as the largest European private equity deal of 1998 to date (story, page 22).