CVC Capital Partners sees US private credit as a key growth market and says the firm is continuing to evaluate potential fund manager acquisitions.
“We have always said that if the right inorganic opportunities came along, then we would look very carefully at those,” said CVC Chief Executive Officer Rob Lucas on this week’s earnings call. “We have highlighted in the past US private credit – that [interest] remains the case.”
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One possible target is Fortress Investment Corp., the Mubadala-backed manager with around $49 billion in assets under management. CVC has already held talks with Fortress and Mubadala, though negotiations reportedly stalled over a mismatch in valuation expectations. Fortress was last valued at more than $2 billion when Mubadala acquired its stake.
CVC remains interested, reports Bloomberg, though it’s unclear whether talks will be resumed.
The firm was also among those hoping to acquire HPS Investment Partners last year but ultimately lost out to BlackRock’s $12.4 billion purchase.
Lucas says the firm has no issue waiting: “We would be very selective. There needs to be a really good cultural fit, there needs to be the ability to scale. We don’t want something that’s too big, and we don’t want anything that’s too small. So it is a question of being very selective there, and we’re not in any rush.”
While Lucas espouses the firm’s patience, CVC has separately moved to shake up operations in its existing US business. Earlier this year, the firm replaced Chris Stadler, who had overseen the North American private equity unit for 18 years, with new co-heads Lorne Somerville and Cathrin Petty, who were both previously based in London.
Stadler will take up a new role as chair of North America at CVC and will remain on the investment committee, but will no longer be responsible for bringing in new deals.
The US has “clearly been an underperforming part of CVC for a while,” said one unnamed limited partner in an interview with the Financial Times. It’s a “totally different market” than CVC’s European roots, and “trying to craft what CVC is in the US, rather than just another firm, is a challenge,” he added.
The firm’s varying private credit fortunes highlight the difference on either side of the Atlantic — as CVC waits for the right deal to jumpstart US growth, its European business has grown into a dominant regional player.
“The bulk of our private credit deployments system is predominantly on the European direct lending side,” said COO Ken Young on this week’s call.
“I think the key point when you’re looking at European direct lending, in particular, is two things: I think the first one is it is a more nascent marketplace relative to the States. So I think there’s still a long way to go in terms of market penetration.”
“The second thing, which is really important, is if you look at the way that we’ve tackled that market opportunity,” Young continued.
“We’ve embedded CVC Credit professionals working alongside the Private Equity teams in many of our European offices. And that just gives us an unbelievable advantage when it comes to originating investment opportunities.”