UK buyout group Permira hasn’t had an easy time of it in the last few years, courtesy of its widely-publicised travails on the fundraising trail. But things appear to be looking up: at press time, it was on the verge of closing a new buyout fund at its (revised down) hard-cap of €5 billion, ending up oversubscribed. And this improved sentiment arguably has a lot to do with its technology team.
TMT has always been a core area for Permira: it has deployed over $8.5 billion across 32 deals since inception. But the fact that eight of those are in the current portfolio shows how important it has become to the firm.
So it was no surprise when Permira announced in May that Brian Ruder, partner and head of its Menlo Park office, had been promoted to co-head its global technology, media and telecommunications (TMT) sector team alongside London-based Richard Sanders, who has led the firm’s TMT efforts since 2010. Ruder has been involved in a number of Permira’s recent tech and media deals including Ancestry.com, All3Media, LegalZoom, Renaissance Learning and TeamViewer. The firm is also planning to expand his Menlo Park team.
So what’s a European firm doing taking on Silicon Valley? Ruder tells Private Equity International that the opportunity set for growth equity investments in technology is huge. But he says that few firms – even in the US – have boots on the ground in the Valley, which he believes is necessary to really understand the market.
These are not the venture-type investments emanating from Nob Hill and Palo Alto that tend to dominate the headlines, Ruder points out. These are companies that “have cleared most of the early stage hurdles”.
“If you look at where software was 10 years ago, late-stage private equity couldn’t get its arms around the model,” he says. “Now you’re seeing software as one of the most successful IPO verticals. Today, online services are where software was 10 years ago. There’s another 10-20 year cycle there, and firms are still trying to get their minds around it. We think our advantage is that we do get it now.”
Permira’s latest acquisition in the space is TeamViewer, the world’s most downloaded remote support solution for consumers and small and medium-size businesses, which it bought in May as a carve-out from GFI Software (GFI is backed by Insight Venture Partners).
“TeamViewer has no competitors with the same business model,” says Ruder. “We are going to work with them to optimise the sales and marketing process. We also think there is opportunity for additional product offerings down the road.”
Other recent purchases like the $200 million acquisition of LegalZoom are predicated on a similar thesis. Most people think of LegalZoom just as a place to do a will online; but Ruder says it can do more to take advantage of its small business user base. “There is a lot of opportunity there for forms that all small businesses need, like contracts, and providing additional features for that segment.”
And the group is starting to deliver tangible results. In May, TV production company All3Media was sold to US trade buyers Discovery Communications and owner Liberty Global. Permira was able to more than double revenues to over £500 million after buying the business in 2006, by expanding from its original UK-only offering to become a genuinely international operator.
Of course, the real test of Permira’s TMT story will only come at exit time. But investors certainly seem to like what they’re seeing in terms of the trajectory so far. The latest vote of confidence came from former feeder fund SVG Capital, which committed an extra €25 million to Fund V in April in light of its ever-improving performance.