BREAKINGVIEWS-CVC pays up for a more credible growth story

By Liam Proud

LONDON, Jan 26 (Reuters Breakingviews) - It might sound counterintuitive for a private equity firm to focus on building a story for public-market investors. Yet that's one way to think about CVC Capital Partners' CVC.AS purchase of U.S. credit shop Marathon Asset Management for up to $1.6 billion, announced on Monday.

CVC, whose heritage and key power centre lies in London, probably hasn't had the stock-market story that it wanted since listing in Amsterdam in April 2024. In dollar terms, its shares are roughly flat relative to the end of their first day of trading. European rival EQT EQTAB.ST is up 49% on the same currency-adjusted basis over that period, while Blackstone BX.N is up 23%. CVC also trades at a chunky discount to those two peers — at about 13 times 2027 earnings, compared with high-teens figures for the others, based on Visible Alpha data.

One problem is that expectations for CVC's growth have stalled. Average analyst forecasts for 12-month forward earnings per share declined over the course of 2025, LSEG data shows, whereas rivals' equivalent figures moved upwards. CEO Rob Lucas and Peter Rutland, who as president appears to be the rising power at the group, seem to be focused on boosting momentum by investing in offerings targeted specifically at wealthy individuals and insurers — racy areas where Blackstone and other higher-valued groups have made great strides.

The Marathon deal helps on both fronts. Buying the shop run by Bruce Richards gives CVC a presence in hot businesses like asset-based lending, which fits well with insurance money and is timely given a recently announced partnership with AIG. It also makes CVC's existing private credit business less European, arguably broadening its appeal.

The trickier question is whether Lucas and Rutland are overpaying for these benefits. It's an especially pertinent question because savvy insiders in the credit world, like HPS Investment Partners and Howard Marks' Oaktree Capital Management, have been selling out to bigger beasts like BlackRock BLK.N and Brookfield. Do they know something that the buyers don't? Adding to the sense of unease are recent problems at Blue Owl, discounted valuations for listed private credit funds, and a steep 19% possible writedown by a BlackRock private debt fund on Friday.

Lucas and Rutland don't seem to be pricing in any brewing pain in the credit world. Marathon could generate about $65 million of EBITDA in 2027, using UBS analysts' calculations based on CVC's disclosures. Using the absolute maximum payout possible under the deal, of $1.6 billion including all earnouts, that would imply a chunky 25 times multiple. For comparison, Blackstone and EQT trade at 11 and 15 times 2027 EBITDA respectively, Visible Alpha data shows.

Admittedly, the CVC-Marathon deal multiple shrinks to 18 after stripping out $400 million of contingent earnout payments, and to 15 times after stripping out some further performance-based elements of the headline deal price. Plus, Richards is taking a lot of stock rather than just cashing out. Combined with CVC's imperative to get the growth story back on track, that just about justifies an optically pricey deal.

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CONTEXT NEWS

CVC Capital Partners on January 26 said it had agreed to buy Marathon Asset Management for $1.2 billion, or $1.6 billion including potential future earnout payments.

CVC's Amsterdam-listed shares were down 1.7% as of 0930 GMT on January 26, compared with a 2.2% fall for its main regional listed rival EQT.