It should come as no surprise that CVC Capital Partners is gearing up for a new fund-raising effort.
CVC, in 1997 ranked by KPMG as the leading buyout player in Continental Europe for the sixth consecutive year, raised $800 million (ecu 740 million) for CVC European Equity Partners in 1996. In the 18 months to January 1998, the group has invested some $600 million in buyouts with a total value of around $2.9 billion. Some of the capital deployed was called down from fund LPs and Citibank, its former parent, for whom CVC acts as exclusive European private equity advisor. Nevertheless, chairman Mike Smith confirmed that the current fund is now approximately 70% invested and said the group expects to issue a memorandum during the first half of this year.
Press reports have cited a $2 billion target for CVC’s new fund; however, Mike Smith said CVC is still in discussion with existing investors regarding the size of the successor vehicle and that no firm decision has yet been made.
Most of CVC European Equity Partners – roughly 80% – was raised in the US, and it seems safe to assume that the States will remain CVC’s primary target market for the new effort. Given current US institutional appetites for European private equity and CVC’s present spend rate, a target much below $2 billion would be surprising, to say the least.
Indeed, CVC appears the most likely contender to match, or even exceed, last year’s record-breaking $2.5 billion Doughty Hanson fund, though whether or not it will publicly acknowledge such an aim is another question. There are a number of factors in CVC’s favour if it does seek to raise a mega-mega-fund. Few European private equity houses can offer a 16-year track record for inspection. Fewer still boast a network of offices covering the UK, Germany, France, Italy, Spain, the Netherlands, Sweden and – a recent addition – Belgium. Furthermore, following last year’s unprecedented activity on the fund-raising front, large pan-European offerings from established European players are likely to be extremely thin on the ground during 1998. Therefore, discounting any potential US entrants to the European buyout market along the lines of Carlyle (story, page 16), investors seeking regional European exposure will face a limited choice of homes for their 1998/89 allocations.