STG Partners has closed its latest flagship fund on $2 billion following a fully virtual fundraise.
STG VI collected LP capital commitments of $1.85 billion, exceeding its $1.5 billion target, and was oversubscribed, Private Equity International understands. It is understood the remainder of the capital came from the GP commitment and a few friends and family investors.
Evercore’s private funds group worked as placement agent for the fundraise. Kirkland & Ellis acted as legal counsel to STG.
STG is a value-oriented investor, focusing on mid-market enterprise software and software-enabled technology services businesses. The firm has yet to start making investments from Fund VI. Its predecessor, STG V, closed on $1 billion in spring 2018.
The firm launched the fundraise in June, with the covid-19 pandemic and resultant shutdowns still in full flow and conducted the entire fundraise virtually. The firm used video conferencing systems to meet with limited partners and held virtual due diligence sessions, including an investor diligence day webcast.
STG VI received strong support from existing investors, who are understood to have provided more than $1 billion of the total, and brought on investors including public and corporate pension plans, insurance companies, endowments and foundations, family offices, consultants and asset managers.
Los Angeles County Employees Retirement Association approved a commitment of up to $100 million to the vehicle, per pension fund documents. Los Angeles Fire and Police Pensions approved a commitment of up to $40 million to the fund, according to a board agenda.
In the virtual environment, existing investors “became ambassadors” for the latest fund, with reference calls taking on even more importance than usual, according to a source with knowledge of the fundraise.
STG has made around seven exits over the past 18 months, which also helped reaffirm the firm’s message around the fundraise, the source added. One such exit was First Advantage, a background screening software company, which Silver Lake acquired, understood to be the largest exit in STG’s history.
Among investments STG has made this year is RSA, a security software company it acquired from Dell Technologies in a $2.075 billion all-cash transaction agreed in February alongside Ontario Teachers’ Pension Plan and AlpInvest Partners.
STG joins a list of firms who have completed fully virtual fundraises this year. London-headquartered Tenzing Private Equity, also a tech-focused firm, raised £400 million ($493 million; €439 million) for its second vehicle this year, also advised by Evercore.
“GPs and LPs have embraced technology – it’s almost jolted us into 2050,” Alexander Rayden, a senior managing director in Evercore’s private funds group who advised on the Tenzing fundraise told PEI in June, adding that technology brings greater efficiency and effectiveness to capital raising.