Campbell Lutyens advises on CDC reorganisation

CDC Group, the $1.5bn UK government-owned risk capital provider to private companies in poorer countries, is changing its organisational structure ahead of an external fundraising effort.

CDC Group Plc, the risk capital investor active in poor countries owned by the UK Government’s Department for International Development (DFID), is in the process of completing an organisational makeover ahead of a fundraising campaign that is aimed at increasing the group’s third party capital under management.

The DFID is being advised on the reorganisation by Campbell Lutyens, the London-based private equity strategic advisory and placement organisation. 

CDC, which has been investing in the world’s poorer regions for over 50 years, currently has over $1.5bn of funds under management and an on the ground presence in over 20 countries. The restructuring is aimed at modernising the group’s organisational structure and at implementing best private equity fund management practice.

The project was announced last autumn, after the DFID had worked with CDC to formulate two fundamental goals for the company. The first is to maximise the creation and long-term growth of commercially viable private sector businesses in the poorer countries of the world. The second is to channel third party funds into those countries. Over the next five years, CDC intends to increase third party capital under management from currently 20 per cent of total assets to 40 per cent. The group is hoping to attract capital from international financial institutions and the private sector.

Under the restructuring plan, CDC is being split into two corporate entities. An investment company will own the assets and will contract with a newly formed management company, through which the majority of the assets will be managed on an arms length basis for an initial period of 5 years. In addition, the investment company is going to seek to support other specialist investment managers operating in poorer countries.

Geographically, the management company will be primarily active in Africa and South Asia, although parts of the existing CDC Group also operate in Latin America and the Far East.

As part of the reorganisation, chief executives have been selected for both the investment and the management company. Paul Fletcher, who is currently chief executive of CDC Group, has been appointed chief executive designate of the management entity. Richard Laing, CDC’s finance director, is going to run the investment company.

This week CDC also announced that Andrew Williams, a director of Schroder Ventures International Investment Trust Plc (SVIIT) and chief executive of Schroder Ventures (London) Limited (SVLL), has joined the firm as a non-Executive director. Jayne Almond, who joined the CDC’s board in 1999, has resigned.

John Campbell, senior partner of Campbell Lutyens, declined to comment on how far the discussions between DFID and CDC have progressed.

Campbell said: “DFID will continue to give considerable support to CDC in order to encourage private risk capital investing in some of the more challenging countries of the world. This can best succeed based on in-depth knowledge and presence within those poorer countries.”

“CDC and DFID are fully committed to achieving development gain within those countries through stimulating the application of best private equity practice. The combination of skills sets within the two component parts of CDC, combined with the financial commitment of DFID and other co-investors, is a strong enabling equation for these markets.”

CDC CEO Fletcher commented: “I am confident that we will build further on our existing platform to be recognised as the leading investor in the world’s poorer countries”.

The reorganisation is due to complete later this year.