Cinven breaks European buyout fundraising record

Spectacular early returns from its third fund have helped Cinven, a European large cap buyout group, to a record fundraising but rival firm Permira is hard on its heels.

Cinven, a European private equity firm, has closed its fourth fund with total commitments of €6.5 billion ($8.26 billion), the largest fund ever dedicated to European buyouts. 

CVC Capital Partners, a rival firm, raised €6 billion in 2005 for its European Equity Partners IV and KKR, a US buyout group, held a €4.5 billion close on its European Fund II in October 2005. Permira, a European rival, is scheduled to hold a final close on its latest fund today on €10.8 billion, according to a fund of funds investor.

Cinven’s fund was heavily oversubscribed after just six months in the market. Its third fund, raised in 2002, has returned 100% of invested capital to investors from just three exits out of a total of 18 investments by the end of 2005.

Andrew Joy, the partner who led the fundraising, said the firm had taken pains not to disappoint investors by stopping the marketing of the fund some time before closing.

He said Cinven had determined the latest fund’s capacity by analysing what it could sensibly invest, rather than what it was possible to raise. He said: “We conducted a bottom-up analysis. We looked at what our run rate had been, the increase in average deal size and market conditions. We decided €6.5bn was what we felt most comfortable with. We don’t want to feel the pressure to do deals we don’t want to do.”

Civen said it received commitments from more than 100 international institutions.  More than 90 percent of investors in the €4.4 billion third Cinven fund, raised in 2002, re-invested in the latest fund, with a number of significant new long-term investors joining the list.

A source familiar with Cinven’s 2002 fund said that it was now fully invested.

Cinven’s 19 partners, who on average have worked together at Cinven for more than 12 years, will invest in European businesses with an enterprise value of more than €500 million.

Since 1988, Cinven has made investments with a total enterprise value of
€55 billion in 88 buyout transactions across Europe, 19 of which have been in excess of €1 billion.

This fundraising completes a process started ten years ago to diversify Cinven’s funding base from three leading pension funds British Coal, the Railway Industry and Barclays Bank who were Cinven’s sole initial funders.