Sponsor CVC is following Aesop’s wise words, knowing that “slow and steady” wins the aftermarket IPO race.

The private equity firm is pitching its IPO at a chunky discount to listed peers, particularly European buyout house EQT [STO:EQT], to maximise the aftermarket return.

CVC opened books early on Monday, 22 April, selling up to 128m new and existing shares at an offer price of EUR 13 to EUR 15 apiece, representing a market cap of EUR 13bn to EUR 15bn.

A source close to the deal told ECM Pulse that investors are primarily using 2025 earnings to value the company on a price to earnings (P/E) multiple.

The market cap translates to a 2025 P/E multiple of 13x to 15x – a substantial discount to main peer EQT which trades at almost 21x 2025 earnings, according to data from Fidessa compiled by Factset.

Two other sources close to the deal confirmed EQT as the key comp being examined by European investors. Its main US peer Blackstone [NYSE:BX] trades at around 20x.

The first source close to the deal noted that accepting a near 30% discount at the top of the range to its most obvious benchmark was a deliberate move from CVC.

“Management is happy to take a 30% discount to its nearest peer to make sure this really works,” said the first source, noting that there were several indications through investor education last week that were coming in substantially higher, but that CVC was happy to leave money on the table to keep institutional investors happy.

One of the key metrics in valuing private equity firms is Assets Under Management and CVC has AUM of EUR 186bn versus EQT’s EUR 232bn, just 19.8% below its Swedish peer, compared with the 30% discount on equity valuation, even at the top of the range.

Its AUM is also set to grow. CVC expects its post-fundraising Fee-Paying Assets Under Management (FPAUM) to stand at EUR 136m-EUR151bn, up from EUR 107bn in 2023 in the next year, also pushing its EBITDA to EUR 1.16bn-EUR 1.5bn. Such AUM growth is driven by scaling funds but also by inorganic acquisitions that add new asset classes.

The sponsor already added EUR 16bn with infrastructure manager DIF Capital but signalled in its ITF it is interested in infrastructure secondaries, strategic opportunities and a play in Asia. EQT moved into the Asian market via the 2022 acquisition of Baring Private Equity Asia (BPEA).

“CVC has one of the largest AUMs in Europe so the deal is hugely relevant for us,” said an ECM investor. “It sits in the top quartile for private equity in terms of its strategy and gross IRR. We think it is exposed to long-term secular growth in its markets and its assets are best in class,” he added.

The first source added that CVC’s potential growth in Asia and in the infrastructure sector was also attracting investors to the equity story.

On Monday morning, the strategy appeared to be paying off with the IPO “multiple times oversubscribed throughout the price range on the full deal size,” within minutes according to a message seen by this news service.

The message, perhaps the strongest possible in an IPO, shows that investors appreciated the strategy with more likely to fill the book throughout the week.

EQT model

EQT isn’t just a peer for CVC, but a blueprint, given its own IPO in 2019. The IPO is taking the form of a primary capital raise and a secondary raise by existing institutional investors, like Danube Investment and KIA.

According to the IPO documentation, no shares are being sold by active employees of CVC, meaning that if many of its management and partners wish to cash out, they will have to do so later.

EQT’s own performance since IPO shows there is some credence to this strategy, with the deal also being priced at a compelling valuation in 2019 and the equity value growing substantially afterwards, allowing shareholders to sell later at a substantially higher value.

CVC’s management shareholders have a staggered three-to-five-year lock-up after the IPO, but should the stock price rise post-listing like EQT, that could prove far more lucrative for secondary sell-downs.

The IPO of CVC has also garnered some interest stateside too, particularly in relation to IPO candidate General Atlantic, said one ECM banker. GA confidentially filed for an IPO last year.

Another US-based ECM banker flagged public markets as a potential exit path for owners of other investment vehicles whose management and founding teams could easily turn to an IPO to capitalise on their success.

Playing it safe

CVC has been an IPO candidate for some time but has frequently been delayed by geopolitical shocks. ECM Pulse first wrote about the IPO as a possibility in 2022, but the deal was moved after Russia invaded Ukraine. CVC was also rumoured to be considering an IPO last Autumn but an uptick in market volatility after the October 7 attack on Israel meant the window closed.

Given market volatility because of rising US Treasury yields alongside hostility between Iran and Israel, CVC was minded not to take any risks with the deal and its pricing, the first source said, adding that CVC also wanted to ensure the deal’s window was a short one, with books closing on April 25.

“Investor knowledge of the asset is high because of the previous IPO attempt,” said one of the other sources.

When one problem is resolved, another is created and investors are already concerned about how many shares they will be allocated in the IPO, given the huge demand for the deal, even before the price was set.

But, for CVC, that’s a nice problem to have.

CVC declined to comment for this story.