One thing to start: India’s main opposition party has called for an investigation of the country’s Adani Group over allegations reported by the FT that the conglomerate appeared to have inflated the cost of imported coal.
In today’s newsletter:
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The latest on CVC’s IPO
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Bain’s chipmaking headache
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Mixed results for dealmakers on Wall Street
CVC’s IPO: the final countdown
War in Europe ended CVC Capital Partners’ first attempt at going public last year. Now, it’s having to contend with conflict in the Middle East and a narrow initial public offering window. But the famously hard-nosed investor isn’t deterred.
Unless conditions deteriorate further, the firm is preparing to announce its intention to float in Amsterdam as soon as next week, DD’s Kaye Wiggins and Will Louch report.
The €161bn-in-assets private equity firm intends to sell shares in an entity that will receive its management fees, as well as part of its carried interest — the share of gains it gets when exiting profitable investments, said two people with direct knowledge of the plans.
The listing will allow the company’s co-founders and outside shareholders — including the Hong Kong Monetary Authority, Kuwait Investment Authority, Singapore’s GIC and Blue Owl — to eventually cash out as the firm shifts towards a multi-manager model more in line with its publicly listed rivals including Carlyle Group, TPG and Blackstone.
It will help bolster the firm’s profile at a time when many industry executives are predicting that more money will go to the largest managers. Going public will help cement CVC’s position near the top of the private markets food chain and also provide balance sheet capital to add on new strategies, potentially including real estate.
But it will also, at least partially, upend the fiercely secretive firm’s long-held profit-sharing model, an “eat what you kill” format that grants individuals a bigger share of money from successful investments and separates the most ruthless dealmakers from the pack.
The firm has managed to find some middle ground, however. It has drawn inspiration from its Swedish rival EQT, which listed in September 2019 and helped pioneer a new structure allowing public investors to benefit from management fees while still reserving the lion’s share of performance fees for insiders.
CVC has been building its arsenal in anticipation of the listing, scooping up specialist secondaries trader Glendower Capital and more recently purchasing Dutch infrastructure manager DIF Capital Partners.
It has also proved it can defy the current market slump, breaking industry records by raising €26bn for leveraged buyouts in July.
CVC’s ultimate test still lies ahead. Its sale of a minority stake to Blue Owl’s Dyal Capital in 2021 fetched a valuation of €15bn — but that was at the height of the private equity boom.
The M&A drama deterring Bain’s semiconductor strategy
It was a watershed moment for private equity when a consortium led by Bain Capital clinched an $18bn deal to buy Toshiba’s chip business in 2018.
Four years on, the deal remains the biggest buyout in Japan. But the problem now is how Bain is going to exit an investment in what remains a crown jewel of the country’s semiconductor industry.
The consortium Bain put together was intriguing from the beginning with the inclusion of Toshiba’s arch rival SK Hynix. And now, the South Korean chipmaker is posing a major headache for Bain, the FT’s Kana Inagaki, Leo Lewis and Song Jung-a report.
The US private equity group wants to merge Toshiba’s former chip unit, which has been renamed Kioxia, with its longstanding manufacturing partner Western Digital. Kioxia’s lenders are lining up a loan of $13bn to finance the merger, but SK Hynix has refused to sign off on the deal.
There are still some questions as to why SK Hynix is opposed, but people close to the deal have told the FT that the company had concerns about whether the tie-up would be strong enough to compete against industry leader Samsung. And it seems like SK Hynix isn’t the only investor with questions about the combined group’s technology edge in an intensely competitive market.
Even if Bain persuades SK Hynix to come on board, there is also uncertainty about whether the merger would get China’s regulatory approval. After shelving plans to list Kioxia in the midst of the Covid-19 outbreak in 2020, Bain can revisit the option of going public but it’s currently not a great market for chipmakers either.
Wall Street clings to hope for a dealmaking revival
Goldman Sachs boss David Solomon, who has decided to stop DJing at high-profile events, as the FT revealed earlier this week, is now reckoning with another party-pooper: the bank’s eighth consecutive quarter of falling earnings.
But there are signs that the music could be starting back up again. The Wall Street lender recorded a year-on-year increase in investment banking revenues for the first time in almost two years in a sign that the dealmaking drought may be coming to an end.
The 36 per cent drop in third-quarter profits comes in part due to a hefty writedown on home improvement lender GreenSky, which it sold less than two years after purchasing it for $1.7bn to a consortium led by private equity firm Sixth Street Partners.
Goldman’s painful retreat from consumer banking at least comes with signs of light at the end of the dealmaking tunnel. The bank has taken lead underwriting roles in recent listings including Arm, Instacart, Klaviyo and Birkenstock (though the latter showed us the IPO market still isn’t fully back in fashion) as Solomon looks to refocus on what Goldman does best: trading and investment banking.
JPMorgan Chase posted similarly average results in investment banking fees, while Bank of America beat expectations. Not everyone inspired the same amount of hope, however.
Morgan Stanley’s investment banking revenues fell by nearly 30 per cent from a year earlier to $938mn. “Frankly, banking has been really weak,” said James Gorman, who’s nearing the end of his tenure as Morgan Stanley’s chief after nearly 14 years, while adding that he expects a turnaround after a stronger pipeline of deals this quarter.
His successor will be the one that has to deal with the blowback if that doesn’t happen.
Job moves
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JPMorgan has promoted London-based banker Carsten Woehrn to co-head of mergers and acquisitions for Europe, the Middle East and Africa.
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US financial technology start-up Plaid has hired former Expedia chief financial officer Eric Hart.
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Barclays has named Geoffrey Belsher as chair and country chief executive officer for Canada, based in Toronto. He joins from Resurgam Financial, the early-stage venture firm he launched after leaving CIBC in 2015.
Smart reads
Ready for take-off European airlines are on a dealmaking spree to open lucrative new routes and boost profits, the FT reports.
Time out Everton football club’s proposed sale to 777 Partners has met roadblocks because the Miami-based investment fund failed to provide audited financial statements to British regulators, The New York Times reports.
Part-time PJs Wealthy travellers have a new favourite way to fly private, Bloomberg reports: owning part of the plane rather than the entire thing.
News round-up
US House panel queries Sequoia’s Chinese tech investments (FT)
Premier League to test broadcaster appetite for football rights (FT)
Adidas makes tracks in its post-Kanye recovery (FT)
Social platform X tests $1-a-year subscription model for new users (FT)
Cipriani: balancing a cocktail tray of exclusivity and growth (Lex)
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