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Cinven agrees to pay €4.9bn for a majority stake in Alter Domus

By Enrique Perez-Hernandez, Tarvo Simons, Taha Yassine, Michael Joachim ten Eicken, and Juan Pelaez (IE University) ; Edward Mazin, Aditya Rawat, Evan Solberg, Kendra O’Keefe, Matei Jucan, and Zach Watkins (UCLA)


Photo: Sean Pollock (Unsplash)

 

Overview of the deal


Acquirer: Cinven Limited

Target: Alter Domus

Total Transaction Size: €4.9bn

Closed Date: 4th March 2024

Target advisors: Goldman Sachs International, Raymond James and Ernst & Young (financial), Clifford Chance and DLA Piper (legal)


Private equity firm Cinven has agreed to make a majority investment in Alter Domus, a leading provider of tech-enabled fund administration. Alter Domus also provides corporate services across three sectors: private equity, private debt, and real assets. Cinven was attracted to Alter Domus due to the company’s market-leading service, constant outperformance compared to the market, operations in attractive markets, and goal-oriented leadership, among various other reasons. Cinven’s management hopes to work closely with Alter Domus’ management (and Permira, a fund involved with Alter Domus that held 34% of equity) to create long-term strategic growth plans with a focus on accelerating growth in key regions while investing further in digital offerings for clients.  


Alter Domus holds a track record of administering funds and several services for prominent clients dominating a large market share. Since Permira’s investment in 2017, Alter Domus has seen its revenue and EBITDA skyrocket by 5x. The investment will impact all existing shareholders, including the company’s founders and Permira’s fund, by selling approximately half of their shares to Cinven. With management from all three firms working together to develop Alter Domus, this company boasts huge potential to complement its increased revenue and EBITDA over the past years. 


“Alter Domus is well positioned to benefit from the strong growth in the fund services market, underpinned by the structural expansion in private capital markets, greater regulation and further outsourcing. The Company is a leading player in the industry with a differentiated service proposition, and we see a compelling opportunity to leverage Cinven’s Financial Services sector knowledge and global footprint to help the business continue this trajectory.” - Maxim Crewe, Partner and Head of Cinven’s Financial Services sector team


Company Details (Acquirer - Cinven)


Cinven is a leading global private equity firm, renowned for its strategic investments across a wide range of industries and regions. Founded in 1977, Cinven has established itself as a prominent player in the private equity space, with a particular focus on Europe. The firm's investment strategy is characterised by its commitment to partnering with companies that have strong market positions and the potential for significant growth. By leveraging its deep industry expertise and extensive network, Cinven aims to drive performance and create value through operational improvements, strategic growth, and market expansion.


Over the years, Cinven has successfully raised several funds, enabling it to execute large-scale transactions and transformative projects. The firm targets key sectors including healthcare, consumer goods, financial services, industrials, technology, media, and telecommunications, among others. Cinven's approach is underpinned by a rigorous due diligence process and a proactive management style, working closely with the management teams of its portfolio companies to implement best practices and achieve sustainable growth. With a long track record of successful investments, Cinven continues to be a trusted partner for businesses looking to reach the next level of their development.


Founded in 1977, headquartered in London, United Kingdom

CEO: Supraj Rajagopalan

Number of Employees: ~150

Investments: >140

Realized Proceeds: >€44bn


Recent Transactions: Sale of a majority stake in Miller (December 2023); Sale of Planasa to strategic buyer EW Group (September 2023); Acquisition of a majority stake in Amara NZero from ProA Capital (April 2023)



Company Details (Target - Alter Domus)


Alter Domus is a global provider of integrated solutions for fund and corporate services, assisting clients with administration, accounting, and reporting services across various investment structures such as private equity, real estate, and debt. With offices in over 20 countries, Alter Domus serves a diverse client base, supporting their needs with technology-driven solutions.


Alter domus actively embraces digital solutions to enhance its services, such as implementing advanced data analytics and automation tools to streamline processes and provide clients with real-time insights into their investments.

 

Founded in year, headquartered in City, State/Country

CEO: Dough Hart

Number of employees: 5,000

EV: €4.9bn


Projections and Assumptions


Short-term consequences


The acquisition will allow Alter Domus to leverage Cinven’s resources to further its growth. With an enterprise value of €4.9 billion, Alter Domus has cemented itself as a leading global tech-enabled fund manager and provider of corporate services.


With Cinven’s available capital, Alter Domus can focus on its next growth stage and accelerate its expansion plans organically and through strategic acquisitions. Alter Domus will likely invest in more tech-enabled and digital offerings, enhancing its ability to meet the evolving needs of its global client base. Alter Domus will likely continue to expand globally, as Cinven offers invaluable M&A expertise in identifying and integrating acquisitions to expand its services and geographical footprint.


The deal is still subject to regulatory approvals, and managing the transition process to ensure seamless integration of the two companies will be critical to creating the most optimal synergy for them.


Long-term Upsides


Cinven's acquisition of a majority stake in Alter Domus for €4.9 billion presents compelling long-term upsides. Alter Domus, a Luxembourg-based fund administrator specialising in alternative assets, boasts a track record of consistent growth, with revenues, EBITDA, and employees quintupling since Permira's initial investment in 2017. The company, originally a spin-off from PwC in 2003, focuses on private equity, real assets, and private debt, managing over $2.5 trillion in assets.


The strategic alignment between Cinven and Alter Domus is evident in their shared commitment to technology-enabled partnerships and operational excellence. Cinven, with a history of investing in high-growth businesses, recognizes Alter Domus as a global leader with blue-chip clients and outstanding service levels. The deal not only signifies Cinven's confidence in Alter Domus but also presents significant growth potential for the fund administrator.


Alter Domus' international expansion to 23 jurisdictions, particularly its successful entry into the US market, positions it for further growth. Cinven, experienced in targeting businesses serving the fund management industry, aims to capitalize on Alter Domus' strong business model and growth drivers. The prospect of acquisitions across markets and geographies enhances the long-term growth outlook.


The transaction's success for Permira, generating a more than seven-times return on investment, underscores the attractiveness of Alter Domus as an investment. The ongoing partnership between Permira, the group's founders, and Cinven signals a collaborative approach to navigating the next phase of Alter Domus' journey.


Risks and Uncertainties

 

Considering the strong market position of Alter Domus and the impressive growth numbers over the last years, this deal is a rather low-risk acquisition. Rory Neeson, Partner and Head of Cinven’s Business Service Sector team, specifically mentioned that the fund service sector has been a priority sector for Cinven’s strategy and the integration of Alter Domus into their portfolio can be expected to run rather smoothly. Alter Domus represents a scarce, market-leading global fund services platform, with a blue-chip customer base currently working together with 90% of the top 30 asset managers worldwide. Looking into the history, the previous investment of Permira,  a leading British investment firm, has increased their revenue, EBITDA and employee numbers by 5x. 


Despite the rather low-risk outlook on this deal, there are potential threats that should be considered. The key risk lies in the fact that Cinven will acquire around half of the stocks of Alter Domus and will mainly acquire them from Permira, who will continue to keep a high stake in the ownership. Therefore the successful strategic corporation with Permira and especially the founders of Alter Domus, who will also keep ownership, will be crucial for the success of this investment. Ensuring seamless integration and alignment of visions among all stakeholders, including Cinven, Permira, and the founders of Alter Domus, will be imperative to leverage their combined strengths, mitigate potential conflicts, and capitalise on the synergies that could drive the strategic growth and market positioning of the firm in the long term.

 



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