Silver Lake raises $15bn fund for new tech deals

June 2017 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

June 2017 Issue

Technology and media investment specialist, private equity (PE) firm Silver Lake Partners has closed its fifth buyout fund at $15bn, surpassing the firm’s initial target of $12.5bn.

Silver Lake’s V fund will considerably boost the firm’s purchasing power in the tech space and will be a further fillip to Silver Lake which has seen its fourth fund – which closed at $10.3bn in April 2013 – achieve returns of nearly 31 percent for investors.

“We recognise and take seriously our responsibility to serve as stewards of capital for our limited partners and their beneficiaries in an international investment environment characterised by growing complexity, disruption and change,” said Silver Lake managing partners Mike Bingle, Egon Durban, Ken Hao and Greg Mondre in a statement announcing the closing. “We remain intensely focused on Silver Lake’s differentiated strategy of global technology investing, which positions us to partner with the world’s premier management teams to leverage deep domain expertise, tap extensive industry relationships and drive innovation to achieve long-term value. We are excited by the strong investor demand for our fifth fund and are deeply gratified by the confidence our limited partners have demonstrated in Silver Lake. We are very appreciative of the continued support of our long-term investors and pleased to welcome new investors to the fund.”

The fund will prioritise opportunities in the US and invest in tech-related business focused on cyber security, e-commerce and healthcare, as well as companies in the semiconductor, software, cloud computing, transaction processing, IT infrastructure, energy, financial services and media sectors.

Fund V attracted a diverse field of investors, including public and corporate pension funds, sovereign wealth funds, insurance companies, endowments, foundations, funds of funds, family offices and technology industry leaders, as well as individual investors from North America, South America, Europe, Asia and the Middle East. It generated $14.5bn of limited partner capital commitments; the remaining $500m was sourced from the fund’s general partners.

“What resonated with investors in this fundraise is what resonates with industry CEOs: Silver Lake’s flexible investment structures, conservative use of leverage, and an intensive focus on growth,” said Susannah Carrier, Silver Lake global head of fundraising and investor relations. “Under the leadership of the managing partners, Silver Lake continues to strive for a culture of excellence and an alignment of interests with our limited partners to deliver superior investment performance. These goals have defined Silver Lake since its inception eighteen years ago and will continue to guide the firm in the years ahead.”

Tech focused deals have become a staple of the PE diet in recent years. Around 20 percent of all US PE deals in the first quarter of 2017 were in the tech sector – roughly double the average for the past decade, according to Pitchbook. Funds are increasingly eyeing the technology industry for their next acquisition. Forty percent of PE investors surveyed by Preqin expect to increase their PE investments in 2017.

Silver Lake’s new fund is the largest tech focused PE fund ever raised, eclipsing the $10.5bn fund raised by Vista Equity Partners in late 2016. However, the $100bn Vision Fund assembled by Japan’s SoftBank for technology-focused deals is looming large. Silver Lake will have to be agile and decisive when looking for tech opportunities, in competition with SoftBank or any of the other funds targeting the tech space.

Silver Lake, founded in 1999 and headquartered in Silicon Valley, is the global leader in technology investing, with about $39bn in combined assets under management and committed capital. It has a team of approximately 100 investment and value creation professionals located in Silicon Valley, New York, London, Hong Kong and Tokyo.

Richard Summerfield