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CVC may be a great deal maker, but it hasn't had much luck in timing its own listing.
Over the past two years, the European private equity group has twice postponed its IPO plans, as markets were turbulent due to geopolitical tensions. It has now announced its intention to float, thus joining the list of those eagerly monitoring developments in the Middle East.
Despite the circumstances, it's not hard to see why CVC is keen to move forward. Large private equity groups love having shares listed. It gives them higher status, access to capital and – in the long term – offers founders and employees the opportunity to sell their holdings. Firms such as Blackstone, KKR and Sweden's EQT have taken the lead. The fact that these stocks have risen sharply over the past year — with KKR stock up 85 percent — will no doubt whet CVC's appetite.
The CVC code can also indicate an increase in its volume. The infrastructure manager bought DIF last year. It is also nearing the end of a €59 billion fundraising round, which includes the record €26 billion private equity fund it raised last year. This will lift fee-paying assets under management from the roughly €100 billion it had in 2023 to somewhere in the region of €140 billion by 2025. CVC expects that management fees and performance fees on its expanded asset base will bring revenue to 1.9 Maybe a billion euros. Taking into account operating leverage, this could lead to a doubling of after-tax profits to around €1 billion.
How much would investors pay for this growth spurt? Its Swedish peer EQT is trading at a whopping 20 times 2025 earnings, but that comes after a rapid rise in the share price. At a more modest multiple of 18 times, and applying an IPO discount of perhaps 25 percent, it results in a valuation of €13.5 billion, at the low end of the €13 billion to €15 billion that CVC is said to be targeting.
The group would be wise to price the IPO conservatively. After all, she's barely even dipping her toe into the listed waters. The €1.25 billion it plans to raise – with €250 million of newly issued shares and €1 billion sold by external investors including Singapore's Gulf Investment Corporation and Kuwait Investment Authority – implies a meager free float of perhaps 10 per cent. Active employees are holding on to their shares, at least for now, and will want to see their value rise. Market sentiment is bound to be more fragile than it was just last week.
If CVC is third time lucky, he will still need to tread carefully.
camilla.palladino@ft.com
