Global Private Equity – Europe and Beyond
Marc St John, Partner
October 2013
Disclaimer
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Agenda
 CVC Fund VI Raise: Strategy, Tactics, Results & Lessons Learned
 Europe as an Investment Opportunity
 Managing a Global Private Equity Business
 The Case for Private Equity
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CVC Fund VI Raise: Strategy, Tactics, Results & Lessons Learned
CVC Fund VI Raise – Strategy
 De-risk the PE Business as Quickly as Possible
 Create Momentum
 Supply / Demand Cover
 Drive Terms
 Sell Europe
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CVC Fund VI Raise – Tactics
 Keep the Ball in the Others’ Court as Much as Possible
 Numbers / Documents in the Data Room
 Full Firm Involvement
 Core Messages Internalised
 Consistent Messaging
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CVC Fund VI Raise – Results
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Months from Launch to Closing
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CVC Fund VI Raise – Results
33
Countries Visited During the Fund Raise
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CVC Fund VI Raise – Results
891
Number of Individual Investor Meetings
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CVC Fund VI Raise – Results
1,504
Number of Times DD Pack Downloaded
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CVC Fund VI Raise – Results
117,012
Miles Travelled during March by MSJ
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CVC Fund VI Raise – Results
$1,000,000,000
Largest Commitment
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CVC Fund VI Raise – Results
c.$8,000,000,000
Commitments Processed Between
28 June and 5 July
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CVC Fund VI Raise – Results
166
Unique Side Letters Negotiated
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CVC Fund VI Raise – Results
$18,200,000,000
Demand for $13,650,000,000 Available
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CVC Fund VI Raise – Lessons Learned
 Keys to Success:
–
–
–
–
Preparation
Right Counsel
Quality of Relationship
Momentum
 Bifurcation in the Market
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Europe as an Investment Opportunity
Europe – Macro to Micro
Macro
The Euro and the Banking System
Midi
The Economies
Micro
The Companies
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Macro – European Union
 EU: a Poorly-Constructed Currency Union
 Formed just Before an Unprecedented Credit Boom
 Capital Flowed from North to South
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Macro – Though there are some Headwinds…
“The Eurozone: Tale of a Bad Marriage”, Presentation to CVC by Martin Wolf (12 Sep 2013)
Associate Editor & Chief Economics Commentator, Financial Times
 Happy Honeymoon – in the first decade, members had a honeymoon, in which everybody, alas,
got what they wanted, laying the ground for an acute crisis:
– Countries with historically low credibility and high interest rates enjoyed low interest rates,
surging capital inflows and booming economies: they spent on their partners’ credit
– Countries with an historic attachment to export surpluses got improved competitiveness and
apparently good investment opportunities for their surplus funds
 Bad Marriage – a number of very different economies and polities decided to share a single
money, but they did not agree to share a fiscal system or a banking system
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Macro – Though there are some Headwinds…
 Why it is Hard to Save the Marriage – challenges to be met include:
– Debt write-offs
– Financing
– Structural Reforms and Divergent Inflation
– Reforms in relation to Banking, Fiscal and Political Union
 Obstacles to action are Economic, Ideological and Political
Good marriage Unlikely; Divorce remains a Possibility; Bad Marriage most likely Outcome
– Will take a lot of Reform, both Economic and Political
– Will take at least a Decade
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Midi – The Global Competitiveness of European Economies
Global Competitiveness Index (2012-2013)
Metrics
2012 -2013
Ranking
 Institutions
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Country
Switzerland
Singapore
Finland
Sweden
Netherlands
Germany
United States
United Kingdom
Hong Kong
Japan
Qatar
Denmark
Taiwan
Canada
Norway
Austria
Belgium
Saudi Arabia
Korea Rep.
Australia
2011-2012
Ranking
 Infrastructure
1
2
4
3
7
6
5
10
11
9
14
8
13
12
16
19
15
17
24
20
 Macroeconomic Environment
 Health and Primary Education
 Higher Education and Training
 Goods Market Efficiency
 Labour Market Efficiency
 Financial Market Development
 Technological Readiness
 Market Size
 Business Sophistication
 Innovation
Source: The Global Competitiveness Report, 2012-2013. World Economic Forum.
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Micro – The Hidden Champions of Europe
What Is a “Hidden Champion”?
Number of Hidden Champions
 Leader in its market
USA
366
Japan
220
China
68
Europe
1,933
 Less than $7 billion in sales
 Low public visibility
Source: “Hidden Champions”, Professor Hermann Simon.
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Managing a Global Private Equity Business
CVC Capital Partners
Our Approach
 Small Locally-Rooted Teams with Embedded Senior Oversight
 Compensation Aligned with Performance
 Over-Resourcing
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Small Locally-Rooted Teams
20 Offices Globally
Operations
FIG Financing FIG
Operations TMT
New York
Jersey
Madrid
Zurich
Paris
Brussels
London
Amsterdam
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Singapore
Frankfurt
Milan
Stockholm
Luxembourg Copenhagen
FIG
Hong Kong Financing
Bangkok
Operations
Shanghai
Operations Beijing
Seoul
Tokyo
Aligned Compensation
Same Principles as We Apply to Our Portfolio Company Managers
 Compensation Tied to Investment Performance
 Performance Measured at Level of Investment
 Own Money at Stake
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Over-Resourcing
Current Deal Leaders
Total
Number
Number of Investments Number of Deals /
Led or Co-Led
Capacity Per Annum
49
312
98
10 – 12
Actual
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The Case for Private Equity
Private Equity performance vs. Listed Equity – Net to LPs
PE-backed Investments Outperform Listed Companies over Time
Source: Cambridge Associates, Q1 2013
Notes:
(1) Global Private Equity Only Fund Index Summary: End-to-End Pooled Return, net of fees, expenses and carried interest
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How does PE do it?
PE Investors Bring a Unique Business Model and an Effective Toolkit to do the Job
 Single Shareholder
 Alignment of Interest
 This is All We Do / Simple Fixes
 Access to Expertise
 Leverage
 Exit Options
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