CVC Capital Partners is set to expand in infrastructure, one of the most active areas of dealmaking, as it nears a deal to acquire DIF Capital Partners that will diversify its business ahead of a potential listing.
The European private equity firm could announce an agreement to buy DIF as soon as Tuesday, people with knowledge of the matter said. Netherlands-based DIF has around €16 billion ($17 billion) of assets under management, according to its website.
Turbulent credit markets and rising interest rates have made it trickier for buyout firms to pull off good deals. That’s led the volume of private equity takeovers to fall 47% this year to $138 billion, according to data compiled by Bloomberg, and put an increasing focus on faster-growing areas like private credit and infrastructure.
Private equity firms have often found it easier to finance infrastructure investments offering predictable returns, and funds dedicated to that strategy have been raising ever-larger pools of capital. DIF has announced deals this year to invest in a Finnish fiber-optic network, a Canadian geothermal power company as well as student housing assets, an energy storage company and a district heating provider in the UK.
New Strategies
CVC’s move comes as major institutional investors increasingly dedicate money to larger private equity firms that can offer a “one-stop shop” through a range of strategies, rather than doling out smaller chunks of money to an array of different firms.
Infrastructure has been a hotspot for deals over the past year even as the volume of leveraged buyouts has slowed. A number of other major investment firms, from New York giants like Blackstone Inc. and KKR & Co. to European rivals such as EQT AB, already have dedicated infrastructure businesses that now account for some of their biggest transactions.
CVC said in July it had raised €26 billion for the world’s biggest-ever buyout fund, defying a challenging fundraising environment. It’s been building out new areas, agreeing to buy London-based Glendower Capital in 2021 to gain a foothold in the fast-growing market for secondaries.
Yield Play
The firm also runs other strategies from credit and direct lending to growth investments. CVC, which ranks as one of Europe’s biggest private equity firms with around €140 billion under management, has been seeking to diversify its business in preparation for an initial public offering in Amsterdam.
Discussions are ongoing, and there’s no certainty the talks with DIF will result in a transaction, the people said, asking not to be identified because the information is private. A spokesperson for CVC declined to comment, while DIF didn’t immediately respond to emailed queries.
DIF runs traditional infrastructure funds aiming for low-risk investments that can generate strong yields, with targets ranging from government concessions and utilities to renewable energy projects. It also has a core-plus strategy focused on small and mid-sized companies in the telecommunications, transport and energy transition sectors with asset-heavy business models.
The firm started raising capital last year for a new €4 billion infrastructure fund as well as a €1.5 billion core-plus fund, according to its website. It had more than 200 employees spread across 11 offices in Europe, the Americas and Australia as of last year.
DIF is led by Chief Executive Officer Wim Blaasse, a former PwC partner responsible for public-private partnerships. It was founded in 2005 by Dutch entrepreneurs Maarten Koopman and Menno Witteveen, who worked at predecessors of ABN Amro Bank NV and built up industrial company DTG before selling it in 2002.
Author: Swetha Gopinath, Aaron Kirchfeld and Dinesh Nair