CVC’s tortuous path to going public

One thing to start: Microsoft has agreed to invest $1.5bn in Abu Dhabi artificial intelligence group G42, its latest big bet on the technology that underscores deepening collaboration between the US and United Arab Emirates.

In today’s newsletter:

European buyout giant CVC nears its IPO endgame 

CVC Capital Partners hasn’t had timing on its side. The firm, one of Europe’s largest buyout groups, has twice delayed going public on the Amsterdam Stock Exchange. Just as it was nearing the finishing line on those occasions, there was Russia’s full-scale invasion of Ukraine. Then the Israel-Hamas war. 

On Saturday, as Iranian missiles rained down on Israel, the firm’s senior management had an eerie sense of déjà vu. But by Monday morning, market fears of an escalation had receded and CVC announced its intention to float. The firm, which manages €186bn in assets, aims to raise more than €1.25bn through the offering.

After speaking to more than a dozen current and former staff, advisers, investors and rivals, many of whom asked not to be named, DD’s Kaye Wiggins and Will Louch have the saga of CVC’s tumultuous path to going public. 

A public listing is likely to make the PE giant a lot of money. The firm’s public US rivals have made a killing in the public markets, with the collective value of their shares rising by more than $40bn since the beginning of 2023. Blackstone, KKR and Apollo Global have neared or eclipsed record highs recently, while European competitor EQT has seen its fee-earning assets soar since going public.

Still, the public market isn’t for everyone, and some have feared that CVC’s “eat what you kill” ways could be upended by a public listing. The firm, which made its name buying stakes in companies including the Six Nations rugby tournament, Formula One and UK retailer Debenhams, has undergone a serious overhaul during its odyssey to go public. This includes co-founders Donald Mackenzie and Steve Koltes both bowing out and CVC expanding into new investment strategies such as infrastructure. 

There are certainly benefits to working for a private firm. Until now, CVC’s executives have enjoyed largely flying under the radar while raking in multi-million-pound “carried interest” payouts that are subject to low taxes. Mackenzie has a 52-metre luxury superyacht, while Koltes and fellow co-founder Rolly van Rappard own one that is 56 metres.

Ultimately, the company decided the perks outweigh the drawbacks. The firm’s decision makers hope going public will attract talent and raise more money from wealthy individuals as well as their institutional backers such as pension funds. Plus, in Europe some models of going public don’t require firms to disclose how much money top executives make in carried interest.

“Everybody is on board now, but it took many years for people to come around,” one insider said.

Goldman plays to its strengths again

Goldman Sachs is going back to the basics. The bank’s profits rose 28 per cent in the first quarter, buoyed by its hallmark trading business. Its net income of $4.1bn for the first three months of the year blew past analyst forecasts and its stock closed up almost 3 per cent on Monday.

It’s a step-change for chief executive David Solomon, with the bank making a turnaround after it decided to pull back from consumer lending (remember Marcus?). Its equity and fixed-income trading businesses proved to be some of the biggest rainmakers in the first quarter, with both pulling off 10 per cent revenue increases from a year earlier.

The gains were bigger than at rival banks JPMorgan Chase and Citigroup, which reported last week. Bank of America and Morgan Stanley report today.

There are glimmers of hope that investment banking might also be set for a comeback. The division had its best quarter in two years with revenues of $2.1bn. (Although still well behind the peak reached during the pandemic’s dealmaking craze.) Public listings from Reddit and AI infrastructure group Astera Labs have also raised hopes for an IPO market revival.

While Goldman abandons consumer banking, it’s trying to build out a massive wealth and asset management business that brings in a steady stream of fees, Lex writes. Mergers and acquisitions have also finally started to pick up. The number of mega-takeovers worth at least $10bn more than doubled in the first quarter. That’ll surely be a boon for fees.

What’s Swedish for equity?

Since it was founded 30 years ago, EQT has grown from a small Swedish buyout group into one of the world’s largest private investment firms with more than €200bn in assets.

This has minted large fortunes for its senior executives, with Forbes making the claim that EQT has made nearly as many billionaires as Google. While the private equity industry has taken off over the past few decades, not everyone has grown with such speed as the Stockholm-based firm.

So how did they do it?

From inception, the investment firm had a secret weapon: the Wallenberg family, a low-key Swedish industrial powerhouse that owns large stakes in companies ranging from AstraZeneca to Siemens.

The family was pitched the idea of investing in a Swedish private equity firm by EQT’s co-founder Conni Jonsson in the early 1990s. They were sceptical, deterred by the corporate raider image that the industry was associated with. But at Jonsson’s insistence, they decided to back him anyway.

Early deals proved successful and the firm grew rapidly. In 2014, Jonsson stepped back as managing partner with EQT overseeing €13bn in assets and having expanded into other areas such as infrastructure and credit.

It wasn’t until 2019 that it really took off. The company took the bold move of going public, opening itself up to levels of scrutiny usually anathema to private investment groups.

Listing proved transformative and EQT used the money raised to strike deals for Asian rival Baring Private Equity and US property group Exeter.

But the company also took the contrarian move of selling its credit unit, an area many of its listed competitors have been seeking to grow. It’s also sitting on some deals struck at the height of the private equity frenzy which it will need to exit in a less exuberant environment.

Job moves

• Tesla is cutting at least 14,000 jobs as the worldwide electric vehicle slowdown and brutal price war hits the American carmaker.

• Freshfields has hired David Boles as a partner on its global transactions practice and equity capital markets team in London. He previously worked for Cooley.

• Herbert Smith Freehills has promoted 27 of its lawyers to partners.

• Latham & Watkins has hired Tracey Zaccone and Justin Rosenberg as partners in New York to focus on M&A and private equity. They previously worked for Simpson Thacher.

• Alvarez & Marsal has hired Manuel Sammut as a managing director in its Europe, Middle East and Africa corporate finance practice. He previously worked for William Blair.

Smart reads

Basquiat bond Sotheby’s is looking to borrow half a billion dollars with asset-backed securities, Alphaville reports. Why not use their Warhols and Rembrandts as collateral?

War room Amazon took on a secret mission to beat Trader Joe’s. It was just one step to total dominance, The Wall Street Journal reveals.

Unglamorous seven The stock prices of some of the FTSE’s least glamorous companies are outperforming their household name peers, the FT’s Oliver Ralph writes.

News round-up

Hedge fund accused of masterminding tax fraud in £1.4bn High Court trial (FT)

Trump Media’s first auditor quit months after being appointed (FT)

Institutional investors pull $2bn from Ashmore (FT)

Firm founded by Russian oligarchs to buy London building for £100mn (FT)

Thames Water shareholders backed away over regulator’s debt demands (FT)

Berlusconi family group calls for European media consolidation amid ProSieben boardroom battle (FT)