- Date
- 22 April 2024
Full Disclosure:
CVC to IPO in Amsterdam
By Jaysen Sutton |
Hi Reader 👋🏽,
The Story
Last week, CVC announced its plan to float on the Amsterdam Stock Exchange.
Why would a private equity firm want to IPO?
It is a little unusual. The private equity industry has traditionally shied away from the public eye. Listing on the stock exchange means the disclosure of information, scrutiny from investors, and subjects a firm’s share price to the whims of the markets.
But a public listing allows CVC to raise money. This is useful permanent capital, outside of the income a private equity earns from management fees (an annual fee to cover their overhead expenses) and carried interest (a percentage of profits from the fund).
By going public, CVC raises money from a wider pool of investors who want exposure to private equity but might otherwise be unable to invest in a fund. This money can be used to fund faster expansion by entering new markets, asset classes or by buying up companies. CVC recently acquired infrastructure manager DIF Capital Partners and expressed interest in buying the Italian arm of EY.
An IPO also allows CVC’s existing shareholders, like the Kuwait Investment Authority and Singapore’s GIC, to exit their investments. This is a common reason that companies go public. The founders and investors get a big payday for selling a piece of their ownership stake. Once public the stock can then be used to attract talent and align compensation for existing employees.
Finally, after postponing its planned IPO twice, CVC has watched the recent success of its listed European rival EQT after the less flattering IPOs of Blackstone, KKR, Apollo and Carlyle. The firm led a turnaround in private equity listings after offering shareholders all its management fees rather a traditional split between its management fees and performance fees. The success of this model led to a flurry of private equity firms adopting the same model.
What does this mean for law firms?
One of the best parts of being a legal adviser to a private equity firm is the volume of transactions that firm will undertake. The business of private equity means a lot of dealmaking over the life of a fund, which means advising on the acquisition of a company, as well as its sale.
CVC’s flotation requires the expertise of equity capital markets lawyers in London and Amsterdam. Freshfields has been selected to advise CVC on its Amsterdam IPO. The firm previously advised CVC on its acquisition of infrastructure manager DIF.
Notably, one of Freshfields' advisers, Christopher Mort, heads the firm’s sports and gaming practice. He formerly advised Mike Ashley on his takeover of Newcastle United and subsequently took leave to serve as chairman of the football club.
Have any thoughts? I'd love to hear your perspective below!
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