CVC Capital Partners has agreed to acquire secondary buyout specialist Glendower Capital in a deal that will provide one of the most prominent buyout firms with a new strategy to lure investors.
CVC and Glendower will combine to create an alternative asset manager with 113 billion euros ($133 billion) under management, according to a statement. Neither party disclosed financial details of the transaction. Glendower management won’t cash out and will continue to lead the business independently under Glendower’s name. Bloomberg reported about the potential deal earlier this year.
“When CVC approached us initially about the transaction, we wanted to remain independent,” Carlo Pirzio-Biroli, Glendower’s managing partner and chief executive officer, said in an interview. “After engaging in the discussion, we had a hard time figuring out why not to do the transaction.”
The rapid growth of the secondaries market exceeded the firm’s expectations, Pirzio-Biroli said, adding that being part of CVC will help Glendower accelerate its expansion and further institutionalize the business. For CVC, the deal will allow it to offer investors faster returns because the holding periods for secondaries are shorter than for buyouts.
London-based Glendower manages about $8 billion and uses this money to buy existing portfolios of private equity fund holdings. The secondaries market has evolved in recent decades as a way for buyout firms and their investors to rebalance allocations and draw on cash when needed. Secondaries deals valued at a record $48 billion were struck in the first half of the year, according to a July report from Jefferies Financial Group Inc.
The deal for Glendower is a rarity in the private equity industry, and shows how the best-known houses are looking to widen what they can offer yield-hungry investors in the low interest rate environment.
The acquisition, and the addition of a fresh investor, is also a further sign that CVC could be paving the way for a future initial public offering. The firm has been informally discussing the idea after the successful listings of Bridgepoint Group Plc and EQT AB, though no decision has been made, Bloomberg News reported last month.
CVC is also in talks to sell a minority stake to investment firm Blue Owl Capital Inc. in a transaction valuing the European buyout firm at around $15 billion, people familiar with the matter said last month.
Record amounts of money are pouring into private equity, giving firms the opportunity to boost their recurring revenue streams through management fees. Securing stable revenue streams is especially important as asset valuations rise and the potential grows for higher rates.
CVC oversees about $163 billion in committed capital, according to its website, having raised a record buyout fund a year ago. It’s known in the industry for its competitive model, where employees who work on successful transactions receive a greater share of profits than those whose deals underperform. In addition to buyouts, CVC also has a credit unit, a growth investment arm and a direct lending team that makes loans to companies.
Established in the 1980s by a group of venture capitalists including Steve Koltes, Donald Mackenzie and Rolly van Rappard, CVC is majority owned by its employees.
“Glendower has a very similar investment-led culture to CVC as well as the operational and financial scale to address what we see as a compelling market opportunity within secondaries in the coming years. Their established platform perfectly complements our existing family of private equity and credit strategies,” CVC’s van Rappard said in the statement.
Both CVC and Glendower originally started as spinoffs from banks. CVC came out of Citigroup, while Glendower was spun out of Deutsche Bank AG’s asset management arm.