CVC closes record-breaking European private equity fund

The €16bn fund, the largest euro-denominated vehicle in private equity history, includes a €500m GP commitment.

CVC Capital Partners has set a record for European private equity fundraising, closing its seventh flagship buyout fund on €16 billion.

The firm held a final close on CVC Capital Partners VII on its €15.5 billion hard-cap and reached the final amount through its GP commitment, the firm said.

The vehicle has a 6 percent hurdle rate, slightly below the 8 percent market standard, to reflect a lower return environment in private equity, as previously reported by Private Equity International.

Investors in the fund, which include Massachusetts Pension Reserves Investment Management Board, Teachers’ Retirement System of Louisiana and New Jersey Division of Investment, were given an 8 May deadline to submit commitment documents, as reported by PEI.

In documents prepared for an investment meeting in March, New Jersey State Investment Council revealed that CVC was offering a discount on management fee to limited partners making large commitments to Fund VII.

During the commitment period, LPs who commit less than €100 million were set to pay a 1.5 percent fee, while those with commitments of between €100 million and €250 million would be charged 1.425 percent, the materials showed.

During the investment period, all LPs will pay 1.25 percent in management fees once either the commitment period ends or CVC begins to earn management fees on successor funds – whichever comes first, the materials noted.

The carried interest is set at a standard 20 percent.

The New Jersey documents reveal CVC will seek to invest in opportunities across Europe, regardless of country or sector, and can invest up to 25 percent of the fund in the US. 

Through its flagship buyout funds, CVC has completed 154 investments across Western Europe and North America since inception of Fund I in 1996, investing €28.6 billion and generating more than €32 billion of value creation, the documents revealed. It has fully exited 120 out of the 154 investments, generating a gross multiple of 2.2x and a gross internal rate of return of 26.3 percent on the 120 fully exited investments.

The fund’s key men are: Alex Dibelius, Geert Duyck, Carl Hansen, Steve Koltes, Javier de Jaime, Rob Lucas, Donald Mackenzie, Bertrand Meunier, Rolly van Rappard, Jean-Remy Roussel, Brian Scholfield, Chris Stadler, Soren Vestergaard-Poulsen and Fred Watt.

As at 30 September 2016, the 2014-vintage CVC European Equity Partners VI, a €10.5 billion fund that the firm is still investing, was delivering a net internal rate of return of 1.8 percent and a total value to paid in 1.02x. Its predecessor, the €10.75 billion, 2008-vintage CVC European Equity Partners V, is delivering a 17.5 percent IRR and a TVPI 1.86x, according to the New Jersey documents.

Simpson Thacher & Bartlett advised CVC Capital Partners in the formation of Fund VII. The law firm's team was led by partner Gareth Earl, based in London.