CVC Capital Partners Adds Investment Banking Role to Platformization Strategy

Following in the footsteps of funds such as KKR, Apollo or Blackstone, CVC Capital Partners (CVC) has added a new role as an investment banker. The private equity firm is indeed seeking to embark on the structuring of LBO financing in order to be able to arrange its own operations, Bloomberg has learned. It would now wait for regulatory approval to develop this activity in Europe and the United States. Contacted by L’Agefi, CVC did not wish to confirm the operation.

This initiative is fully in line with the platformization movement launched a few years ago in private equity. The biggest managers (GP, general partners) seek to multiply expertise and offer a wide range of services to their investors (LP, limited partners). This strategy is all the more interesting, in times of crisis, as LPs tend to reduce their number of managers. “During cycle reversals, we historically see a flight to quality towards the biggest market players”attests an observer.

Synergies

This is an opportunity for the funds to accelerate the growth of their income, by developing synergies. By structuring an operation, the GP can thus decide to provide, alongside other financiers, part of the debt via its credit activities. In the case of CVC, these total 36 billion euros in assets (out of 130 billion euros in global assets).

Beyond the synergies, the structuring of LBO debt is in itself a lucrative activity. The GP, as an arranger, can receive commissions ranging on average between 50 and 100 basis points. But be careful not to offend the banks, which see part of their income slipping away and could be even less inclined, in an already tense climate, to participate in this type of financing.

It’s all about size and negotiation. In the absence of sufficiently attractive financing conditions on the market, KKR had itself ensured the takeover of the broker April, via its own financing activity, Capital Markets. “KKR’s strength is being able to tell sellers that we are able to underwrite the full value of the transaction before syndicating the debt. Very few private equity players have financing teams and funds large enough to adopt such an approach,” Jérôme Nommé, partner at KKR, and Amina Lamloum, director, recently explained to L’Agefi.

There is no doubt that the platformization movement has begun and is not intended to stop.