Investment firm Silver Lake has closed a new $15 billion buyout fund for technology deals, as private equity continues to focus on the technology sector.
As one of the largest technology investors in the world, Silicon Valley-based Silver Lake has been at the centre of some of the biggest private equity deals involving technology and media in the past decade. The firm’s new fund, at $15 billion, is one of the biggest ever focused on technology. Its last fund, with $10.5 billion under management, is now garnering returns of nearly 31%.
Clearly, the technology sector continues to be a darling of the private equity world. In the first quarter of this year, around 20% of all private equity deals in the US were in the tech sector – about double the average for the past decade, according to research firm PitchBook. This is with good reason, as private equity firms with an emphasis on technology are now among the best performing. For example Vista Equity Partners, which invests in tech start-ups as well as older software firms, has averaged returns of more than 20%.
Silver Lake’s new fund, while massive, is dwarfed by the $100 billion Vision fund that Japan’s SoftBank has pulled together for technology deals. “That enormous reserve, which counts the Saudi Arabian government and Apple as investors, has shaken the private equity world”, the New York Times observed. Silver Lake told backers that it still sees plenty of opportunity, even with this gargantuan potential rival sharing the arena.
The firm’s pattern in recent years has been to make private equity deals aimed at helping its portfolio companies grow by acquiring competitors. This is exemplified by Dell’s $67 billion purchase of EMC in 2015. To cite another example, the $87 billion chip maker now known as Broadcom grew from Silver Lake’s investment in a much smaller firm, Avago, which it helped take over increasingly larger rivals. Since many of Silver Lake’s most successful deals have centred on its portfolio companies’ so-called “roll-ups”, this strategy is expected to carry over to the new fund.