Company Reports

Narrow-moat CVC Capital Partners will be pleased with its maiden results as a listed company. It reported adjusted EBITDA of EUR 357 million, 9% ahead of the expectations of the company-compiled consensus. In contrast to its other European private market peers, CVC enjoyed a significant increase in realizations of investments in the first half of 2024, leading to a 106% increase in performance-related earnings (carried interest + investment income). Management fees increased in line with average fee-paying assets under management, as did operating expenses – leading to broadly stable management fee and EBITDA margins. We expect a softer second half with lower realizations and, consequently, lower performance fees. CVC's medium-term guidance remains unchanged, and we maintain our EUR 18 per share fair value estimate.

We initiate coverage with narrow moat ratings on all three major European-based private market firms: CVC Capital Partners PLC, EQT AB, and Partners Group Holdings AG. We expect all three firms to remain highly profitable, and the private market industry benefits from established secular growth trends. However, the eye-watering mid-20s EV/EBITDA multiples the firms trade at currently suggest that the market already prices in these strong fundamentals. We do not believe that higher interest rates mark a structural change in the industry, but we expect near-term dealmaking to remain muted.

CVC is the European private assets manager we cover with the most significant exposure to traditional private equity. Its greater private equity exposure increases the potential revenue contribution from volatile carried interest and investment income. We estimate that around a third of CVC's midcycle revenue will come from its share of carried interest and investment income. We expect management fees earned on its private equity funds will contribute around 70% of fees, with smaller contributions from credit and infrastructure. Its flagship European/North American buyout funds alone should contribute around half of overall management fees over the next two years.