European giants eye minimum €38.5bn in mega-raises

CVC Capital Partners, EQT and BC Partners expected to be back on the fundraising trail next year with flagship buyout funds.

2020 is set to be a banner year for mega-funds, with at least three Europe-headquartered firms expected to return to market in the first half with flagship vehicles targeting at least €38.5 billion among them.

Using in-house data to identify funds expected to come to market as well as conversations with industry sources, PEI data show the largest is CVC Capital Partners’ eighth global buyout fund, which will seek €18 billion.

Sweden’s EQT is reportedly looking to raise up to €12 billion for its ninth flagship fund, while London’s BC Partners is seeking around €8.5 billion for its flagship buyout fund BC European Capital XI and is understood to be holding initial discussions with LPs for the vehicle.

“LPs are very active and continue to get good distributions back from their existing fund relationships. They need to reallocate that capital again at high levels,” Steve Eaton, head of Europe at placement firm Eaton Partners, told Private Equity International.

Concerns around an expected decline in returns from the largest buyout funds are driving some LPs into other parts of the private equity market such as country- and sector-focused funds, as PEI reported on Monday. High valuations on entry, a dearth of large, high-quality acquisition targets and the onerous fee burden has made investing in buyout funds less attractive.

CVC Capital Partners VIII, which will be seeking €5.5 billion more than the target of its 2017-vintage, €16 billion predecessor, will follow the same strategy, taking control stakes in European and North American businesses with enterprise values of between €500 million and €5 billion.

EQT is “intensifying preparations for EQT IX and expects to formally launch in 2020”, CFO Kim Henriksson said on the firm’s third quarter earnings call this month.

The target of BC Partners’ 11th flagship buyout fund is roughly 20 percent larger than the target of its 2016-vintage, €7 billion Fund X. It is expected that Fund XI will back companies with enterprise values typically greater than €300 million in Europe. It would also selectively invest in the US.

Heady fundraising plans are also expected in North America and Asia. In the US, KKR will be back next year with KKR Americas Fund XIII, co-president and co-chief operating officer Scott Nuttall said on the firm’s third-quarter earnings call in October. Fund XIII’s target is expected to be around $15 billion, or $3 billion more than its predecessor’s target.

The private equity giant is also reportedly seeking $10 billion for its fourth flagship buyout fund for Asia. If successful, it will be the biggest raised for the region by the New York-headquartered firm.

In Asia, Seoul-headquartered MBK Partners is expected to come back to market next year with its flagship, North Asia-focused fund. MBK Partners Fund V has a hard-cap of $6.5 billion, according to documents from a New Jersey State Investment Council meeting this month. If successful, it will be almost 60 percent larger than its predecessor, which closed on $4.1 billion in 2017, according to PEI data. MBK backs buyouts and corporate divestitures in pharmaceuticals, industrials and financial services.

CVC, EQT, BC Partners, Trilantic Europe, KKR and MBK all declined to comment on fundraising.

Macroeconomic concerns could disrupt private equity firms’ fundraising plans next year, according to Eaton.

“LPs are wary of the point in the cycle and are concerned over pricing and valuations in certain market segments and asset classes,” he said.