Apax joins the tech fund race

The London-headquartered buyout firm is following in the footsteps of peers such as CVC, KKR and Carlyle Group in establishing a technology-focused fund.

Apax Partners has begun fundraising for a digital fund, according to documents released by London-listed Apax Global Alpha (AGA).

AGA’s board intends to commit $50 million to the Apax Digital Fund, conditional on, among other things, the approval and execution of the relevant legal documentation. The target for the vehicle is unknown.

Apax declined to comment.

According to the AGA notice, the fund will “aim to pursue a balanced portfolio of growth buyout and growth equity investments in technology companies globally”.

The Apax Digital Fund will focus on mid-market investments. It is understood the firm will leverage its digital expertise to invest in businesses that don't fit within the size remit of its flagship funds.

Apax is following in the footsteps of fellow European giant CVC, which raised $1 billion in February 2016 for its first fund making growth investments in software and “technology-enabled” businesses.

In December 2016 global private equity firm KKR completed fundraising for its first tech fund, the Next Generation Technology Growth Fund, having raised $711 million.

According to a report released by S&P Global Market Intelligence, private equity firms are paying multiples eight times lower than trade buyers for technology businesses in the EMEA region despite nearly $2 billion extra of private equity capital being invested in the sector in Q1 2017 compared with the same period last year.

EMEA-based private equity firms paid 12.7x earnings on average for businesses in the information technology space, compared with the average of 20.6x for all buyers, as reported by PEI.

At the end of 2016 Apax closed its latest flagship fund, Apax IX, on its $9 billion hard-cap. According to an investor presentation released Wednesday, AGA paid its first capital call to that fund in May, having made a $350 million commitment to the vehicle in May 2016.

AGA’s private equity adjusted NAV increased from €441.9 million as at 31 March 2016 to €484.3 million at 31 March 2016, with €61.4 million of distributions received from Apax VIII, Apax Europe VII, Apax Europe VI and AMI.