Carlyle doubles tech appetite with €1.35bn close

Carlyle Europe Technology Partners IV closed on its hard-cap as TMT-focused funds seek the highest amount among sector-focused strategies.

Carlyle Group has doubled its investment firepower for technology assets.

The Washington, DC-headquartered firm held the final close on Carlyle Europe Technology Partners IV at its €1.35 billion hard-cap, according to a statement. Fund IV raised just over twice the €656.5 million brought in from limited partners for the 2014-vintage Fund III.

Commitments from outside the region accounted for 45 percent of the capital, up from 10 percent in Fund III, head of investor relations Mike Arpey told Private Equity International. US pensions and Asian sovereign wealth funds provided the “vast majority” of this capital.

Fundraising began in October, the statement said.

The CETP fund family, which has a 19-person team, targets buyouts in European and US TMT businesses with enterprise values between €25 million and €250 million. Its portfolio includes software testing business Eggplant, insurance software business Prima Solutions and medical device manufacturer LPG Systems.

“A fund of this size allows us to take advantage of the opportunities without really deviating from the strategy,” Arpey added.

“The core strategy here is to remain very disciplined about the deal size. Usually that would be no actual transaction size in excess of €80 million we want to stay in that sweet spot of the middle market.”

CETP’s sweet spot is deals between €30 million to €80 million in companies generating €5 million to €25 million in EBITDA.

Tech-focused fundraising almost tripled in the five years to 2017 with $60.2 billion gathered that year, according to PEI data. The figure dropped last year to $38.9 billion.

TMT-focused funds in market were seeking $76.7 billion as of 31 January – the highest amount for any sector-specific strategy.

Software buyouts delivered a 1.9x median gross return between 2005 and 2014, compared with 1.6x for non-software deals, according to data from CEPRES PE.Analyzer.

Sales of tech assets have generated huge exits for private equity firms: the global average for general partner exits from IT companies in 2017 was 35x EBITDA – a jump from 24x the previous year, according to data from S&P Global Market Intelligence.

Carlyle is seeking €5 billion for Carlyle Europe V and held a first close on €3.3 billion in April. It is also understood to be in market with its second long-life fund, Carlyle Global Partners II, with an undisclosed target. The first vehicle in the series closed on $3.6 billion in 2016.

The firm is due to report fourth quarter earnings on 6 February.

–  Carmela Mendoza and Adam Le contributed to this report.