You have to hand it to Silver Lake Partners – the technology specialists actually managed to raise a bigger fund after the bursting of the tech bubble.
The Menlo Park, California and New York-based firm has hard-circled $3.5 billion – the fund's cap – for SLP II. About 90 percent of the limited partners in the first fund have recommitted to the follow-on vehicle.
This represents a very impressive sophomore effort for Silver Lake, especially given the atrophied state of other private equity firms launched in the heady late 1990s. Silver Lake raised its debut fund in 1999 and quickly rounded up $2.2 billion in commitments amid feverish enthusiasm for anything tech-related.
As evidenced by the newer, larger fund, the Silver Lake story only became more compelling as venture markets shrank. The firm targets ‘mature’ technology companies for buyouts – businesses with long-in-the-tooth products and predictable revenue in need of fresh ideas and capital.
And in one definitive case, Silver Lake has shown it can deliver on its stated strategy. The firm turned heads in 2000 when it led the acquisition of Seagate Technologies, a disc-drive maker, in an exceedingly complicated going-private transaction valued at $1.7 billion (€1.4 billion). Two years later, Seagate was taken public in one of 2002's biggest – and few – IPOs.
One of Seagate's complications was that it had to be detangled from software company Veritas. In somewhat of a yin to Seagate's yang, Silver Lake recently joined Bain Capital and Warburg Pincus in agreeing to buy a software division of network storage giant EMC for more than $2 billion. The firm is trumpeting this transaction as the largest private equity tech deal ever, and another example of Silver Lake's ability to partner with proven technology companies.
Silver Lake's other portfolio companies range from strong to bankrupt. None have yet shown nearly the same the potential for returns as Seagate, a fact that led some investors to call the firm a ‘one-hit wonder.’ That label has been temporarily repudiated with the strong showing for Silver Lake's second fund.
Silver Lake was founded and continues to be led by Glenn Hutchins, a former Blackstone partner; Jim Davidson, a former Hambrecht & Quist tech investment banker; and David Roux, a former Oracle executive. Another co-founder, tech guru Roger McNamee, a venture capitalist at Integral Capital, has reduced his role at the firm.
HARBOURVEST VII FINDS $4BN
The Boston fund of funds manager has closed HarbourVest Partners VII on $4 billion (€3.27 billion) to be invested exclusively in the US. The programme consists of the venture partnership fund and buyout partnership fund, each of which were oversubscribed and closed on $2 billion. Of the 120 total investors in both funds, more than 40 percent were European and Asian institutions. Most investors made commitments to both. Each fund will invest between $200 million and $300 million per year to newly formed partnerships and $100 million to $200 million per year to secondary purchases.
HarbourVest Partners, founded in 1982, is the oldest private equity fund of funds in the US, with offices in Boston, London and Hong Kong.
DE NOVO II RAISES $250M FOR MEDICAL INVESTING
Menlo Park, California-based venture capital firm De Novo Ventures has announced the close of De Novo Ventures II on $250 million (€204.5 million). Investment bank Lazard acted as placement agent for the fundraising, which was completed within six months. The new fund will be invested in seed and early stage therapeutic medical devices and biotechnology opportunities in cardiology, ophthalmology, orthopedics, plastics and biotech companies with initial human clinical experience, according to a press statement.
POMONA CAPITAL DOUBLES SIZE
Pomona Capital, the private equity fund of funds and secondaries investor operating out of New York and London, has agreed to manage a $1.1 billion (€900 million) portfolio of private equity investments on behalf of ING Investment Management Americas (IIM).
In addition, the companies have instructed Pomona to invest another $500 million in a range of primary and secondary fund interests over the next five years. The agreement increases Pomona's assets under management to $2.4 billion. ING acquired Pomona in 2000.
KPS CLOSES DISTRESSED FUND
New York-based middle-market turnaround specialist KPS Special Situations Funds has closed its Fund II on $404 million (€331 million). The fund, which began fundraising in the fourth quarter of 2002, surpassed its initial fundraising target of $350 million and is more than double Fund I, which closed in February 1998 on $160 million. According to KPS founding principal Michael Psaros, the firm expanded its investor base by more than 20 new limited partners, bringing the total to more than 30, including two Japanese investors. San Francisco-based placement agent Probitas Partners helped raise additional capital after the firm raised an initial $225 million from existing KPS investors.
CITIGROUP CLOSES FUND OF FUNDS
New York-based Citigroup Private Equity, the bank's private equity arm, has closed Citigroup Private Equity Partners, a fund of funds, on $275 million (€223 million). The fund will make investments in private equity funds across various stages, sectors, geographies and vintage years, with the majority of capital going towards US investments and European buyout funds, according to a press statement. Of the total amount raised, $250 million came from “a global base of institutional and high net worth clients,” while Citigroup provided an additional $25 million. The fund has already made undisclosed commitments to five private equity funds.
SUMMIT CLOSES SUB-DEBT FUND
The Boston, Palo Alto and London private equity firm has raised its third subordinated debt fund and now has combined capital of approximately $940 million in the asset class. Summit Subordinated Debt Fund III will co-invest with Summit Partners private equity funds, which command combined capital of $4.7 billion. The fund will provide up to $70 million of mezzanine debt per transaction. Summit focuses on profitable companies in emerging industries.
SOFINNOVA VENTURES CLOSES SIXTH FUND ON $250M
The San Francisco venture capital firm reaches its cap for its sixth investment vehicle. Sofinnova's Fund V raised $220 million. The firm invests between $8 million and $10 million per company and focuses on biotechnology and information technology startups. Sofinnova was founded in France in 1972 and became the first European venture capital firm to open an office in the US two years later. In 1997, the US group split from their French colleagues. The most recent fund received commitments from CalSTRS, Glenmede, Dow Employees Pension Plan, Scottish Widows and Wilshire Associates, among other limited partners.