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CVC may be a phenomenal dealmaker but it has not had much luck in picking timings for its own listing.
Over the past two years, the European private equity group has twice delayed its initial public offering plans as markets were roiled by geopolitical tensions. It has now announced its intention to float, and in doing so joined the list of those anxiously watching developments in the Middle East.
Despite the circumstances, it is not hard to see why CVC might be keen to proceed. Large private equity groups like having listed stock. It gives them a higher profile, access to capital and — over the long term — offers founders and employees the chance to sell their holdings. The likes of Blackstone, KKR and Sweden’s EQT have taken the plunge. The fact that these stocks have risen sharply over the past year — with KKR up 85 per cent — will no doubt have whetted CVC’s appetite.
CVC can also point to a step up in its size. It bought infrastructure manager DIF last year. It is also nearing the end of a €59bn fundraising round, which includes the record €26bn private equity fund it raised last year. That will raise fee-paying assets under management from the roughly €100bn it had in 2023 to somewhere in the region of €140bn by 2025. CVC expects management fees and performance fees on its enlarged asset base to bring revenues to perhaps €1.9bn. Factoring in operating leverage, that might double profits after tax to about €1bn.
How much might investors pay for this growth spurt? Swedish peer EQT trades on a hefty 20 times 2025 earnings but that is after a rapid run in the share price. At a more modest multiple of 18 times, and applying an IPO discount of perhaps 25 per cent, yields a valuation of €13.5bn, at the lower end of the €13bn to €15bn that CVC is reportedly targeting.
The group would be wise to price its IPO conservatively. After all, it is barely putting a toe in listed waters. The €1.25bn that it is planning to raise — with €250mn from newly issued stock and €1bn sold by outside investors including Singapore’s GIC and Kuwait’s Investment Authority — implies a skimpy free float of perhaps 10 per cent. Active employees are holding on to their stock, at least for the time being, and will want to see its value rise. Market sentiment is bound to be more fragile than it was only last week.
If CVC is to be third time lucky, it will still need to tread carefully.
