Private fairness group CVC overhauls US unit after underperforming offers | USAEMALL.com

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CVC has overhauled its US leadership and is hunting for a private credit firm to buy in the country, as one of Europe’s largest private equity firms looks to gain a stronger American foothold after a series of underperforming deals. 

The Amsterdam-listed group has replaced Chris Stadler, who has overseen its North American private equity business for 18 years, with new co-heads Lorne Somerville and Cathrin Petty, both previously based at CVC in London. 

It is seeking to buy a private credit firm in the US to bulk up its presence there, a person with knowledge of the matter said, after failing to clinch a deal with HPS Investment Partners, which sold itself to BlackRock last year. The firm is also shopping for private capital groups focusing on real estate outside Europe, the person said.  

CVC successfully went public last year after several false starts, and its shares have since climbed more than 50 per cent.

It has accumulated about €191bn in assets and struck marquee deals including motor racing’s Formula One. However, it has at times struggled to replicate its model across the Atlantic.

Since going public, it has come under pressure to improve performance in the world’s biggest economy and to increase assets under management to boost returns for shareholders. 

Stadler has been made chair of North America at CVC, a role that is not directly responsible for bringing in new deals. He will remain on the investment committee.

The move follows some underwhelming investments struck on his watch, according to three people with knowledge of the situation. In the new role he will focus on helping to generate better returns from some existing portfolio companies. 

The US has “clearly been an underperforming part of CVC for a while”, said one investor in the firm’s funds, who added that the country was a “totally different market” to Europe, where CVC has specialised in creating long-term relationships and looking for what it sees as unusual or little-understood opportunities. 

“Trying to craft what CVC is in the US, rather than just another firm, is a challenge,” the investor said.

CVC said that “having established and built the US operation for CVC . . . now is the right time for Chris to become chair and hand over to his colleagues”.

“He looks forward to seeing the US continue to flourish as he supports them as US chair”.

CVC has built its reputation in part on having a model in which individual dealmakers are held accountable for the performance of their deals.

The approach means they can make life-changing sums of money if deals succeed, but if things go wrong they can be made to sacrifice lucrative carried interest payouts on other deals they have worked on. 

Some of the firm’s US investments have performed well, with US deals in its 2008 vintage fund outperforming the European ones, according to another person familiar with CVC’s portfolio. Some more recent deals were also performing well, they said, such as Authentic Brands Group and ExamWorks, acquired in 2021.

But the person said US deals had underperformed compared with Europe in CVC’s 2014 vintage fund, and might underperform “a little” in its 2017 vintage one.

CVC has only exited a quarter of the 25 US deals struck through the four flagship buyout funds it has launched since 2008, another person with knowledge of the matter said.

Troubled deals have included IT service provider ConvergeOne, which CVC took private at a $1.8bn valuation in 2019 and which filed for Chapter 11 bankruptcy protection last year. 

In 2023, CVC injected $50mn of equity into seven-year-old investment Anchor Glass, where rating agency S&P Global forecast “negative free operating cash flow” for the near-term. 

The share price of Petco — which CVC bought with Canada Pension Plan Investments in 2016 at a $4.6bn valuation — is down 80 per cent from its 2021 IPO price, putting its market capitalisation at about $1bn.

One of its more successful investments, Teneo, has more than doubled its earnings since CVC acquired it in 2019. But the company has also attracted reputational controversy.