The Luxembourg-based private equity firm, CVC Capital, announced on Thursday that it has raised 26 billion euros (about $29.2), marking the largest buyout fund in history. This landmark development points to a warming trend in global investment activity, just as the Federal Reserve's rate hike phase nears its end.
CVC announced its intentions to start fundraising for its ninth buyout fund earlier this year. Its initial target was 25 billion euros, but the final fundraising amount surpassed that original goal.
Private equity firms faced numerous challenges in 2023 due to the Fed's aggressive rate hike policy. This approach significantly increased the cost of financing transactions for private equity firms, making traditional leveraged buyouts difficult in a high-interest rate environment. Many investors scaled back their allocations in this asset class, which in turn affected private equity fundraising activities.
Consulting firm Bain & Company predicted that fundraising in the private market will decrease by almost 30% this year compared to 2022.
Rob Lucas, a managing partner at CVC, noted that their ambitious goal of raising the largest fund at a record speed under current market conditions was initially seen as overly ambitious by many.
Established in 1981, CVC is one of the globally recognized veteran European private equities.
Aside from CVC, private equity firms like EQT AB and Cinven chose to extend their fundraising deadlines, while Apollo Global Management cut the size of its latest flagship fund.
Bloomberg News pointed out that more mature private equity firms hold a unique advantage in attracting funds, especially at a time when money is becoming more expensive and investors are becoming increasingly selective.
Multiple media outlets, including Reuters and the Financial Times, reported that CVC had plans to go public as early as 2022, with an expected valuation of over 20 billion euros. However, these plans have been repeatedly delayed. Last year, sources told the Financial Times that CVC only planned to take 10% of its business public.
The record fundraising amount may further support CVC's plans to go public.
Interestingly, CVC was also previously involved in a widely circulated gossip story on the Chinese internet. Zhang Lan, the mother of Wang Xiaofei and founder of South Beauty Group, introduced CVC as an external investor in 2014. CVC Capital, seeing the fundamental value in South Beauty, invested $300 million to acquire an 82.7% stake in the company.
However, due to South Beauty's performance decline and stock right disputes, CVC withdrew in 2015. In the subsequent legal battles between CVC and Zhang Lan, Zhang's family trust was breached, leaving her with significant debt. She was forced to rely on live-streamed sales of hot and sour noodles to earn income.