(Adds Warburg role in Interactive Data deal in final paragraph.)
Nov. 15 (Bloomberg) -- Silver Lake Management LLC, the largest technology-focused private-equity manager, will start raising its next fund in 2012, competing for investors with firms such as KKR & Co. that have stepped up deal making in the industry, according to two people with knowledge of the plan.
The fund would be the Menlo Park, California-based firm’s fourth pool for corporate leveraged buyouts. Silver Lake, which oversees $14 billion, amassed $9.3 billion in 2007, a record for a technology fund.
KKR and Warburg Pincus LLC, which have bolstered their technology teams to support more deals, are already fundraising, as is Providence Equity Partners Inc., a firm whose focus includes media and communications. Warburg is seeking $12 billion, while KKR is aiming for $10 billion and Providence Equity is targeting $6 billion.
“Silver Lake may have more competition now than it did 10 years ago, but it’s not like there are 20 firms that can pull off a Yahoo-type deal and do something with it post- acquisition,” said Craig Marmer of Probitas Partners LLC, a San Francisco firm that helps private-equity firms raise money.
Silver Lake is weighing a bid for Web portal Yahoo! Inc. as part of an investor group, according to people familiar with the matter. The firm bought Internet-calling service Skype Technologies SA in November 2009 and sold it 18 months later to Microsoft Corp. for $8.5 billion, making a threefold profit.
Best, Worst Deals
Skype and financial-information service Interactive Data Corp. were among the current fund’s largest holdings at the end of the first quarter, according to a first-quarter client letter. The pool’s $67 million stake in German cable-television producer UnityMedia, marked at 2.7 times invested capital, was the most successful investment, while communication-systems provider Avaya hurt performance with a 6 percent annualized loss through March 31.
LBO firms are seeking $167 billion this year, almost as much as they targeted in 2006 at the start of the private-equity boom, according to researcher Preqin Ltd. About 90 percent of longtime backers say they won’t commit to some of their existing managers, a June survey by investment firm Coller Capital Ltd. showed.
Silver Lake’s current fund generated 1.3 times invested capital after fees through March 31, according to data on the website of the California Public Employees’ Retirement System, one of the firm’s investors. The fund deployed $5.3 billion in 17 deals through March 31, according to the investor letter.
Gemma Hart, a spokeswoman for Silver Lake, declined to comment on its fundraising plan. The people familiar with the firm, who asked not to be identified because the information isn’t public, didn’t know the target for the new fund.
KKR Technology Push
Silver Lake is headed by co-founders James Davidson, a former investment banker; Glenn Hutchins, a former Blackstone Group LP executive; and David Roux, a former Oracle Corp. executive. They started the firm in 1999 with Roger McNamee, a Silicon Valley investor, and it now has 100 investment professionals.
The firm’s most recent transactions have been put together by deal makers including Mike Bingle, Egon Durban and Greg Mondre, who are in line to earn a greater percentage of the new fund’s profits, the people familiar with matter said.
The firm led a group of investors to acquire Sungard Data Systems Inc. for $11.3 billion in 2005, the largest technology buyout at the time. It began investing in midsize companies and debt securities in 2007. In 2008, Silver Lake sold a 9.9 percent stake to Calpers, the largest U.S. public pension fund, for $269.8 million, valuing the firm at $2.7 billion.
When Silver Lake gathered $3.6 billion for its second fund in 2004, the firm also dubbed it the largest ever for a technology pool. That year KKR formally established a group dedicated to the tech industry.
Even without a dedicated tech fund, New York-based KKR has deployed about $9 billion in at least 17 deals in the industry since 1995, including 12 since 2004, according to the firm. KKR acquired Norwegian software provider Visma ASA in September 2010 and Northrop Grumman Corp.’s government-consulting unit TASC in November 2009.
KKR teamed in July with Silver Lake and Palo Alto, California’s Technology Crossover Ventures in agreeing to buy Web registration and hosting company Go Daddy Group Inc. in a deal valuing the company at $2.25 billion. Since 2003, KKR has hired George Fisher, former chairman of Motorola Inc. and Eastman Kodak Co., and Liu Chuanzhi, the founder of computer maker Lenovo Group Ltd., as senior advisers, and added Marius Haas, a Hewlett-Packard Co. deal maker, as an industry adviser in May.
Warburg, based in New York, has strengthened its presence on the West Coast. Mark Colodny, a managing director in its technology, media and telecom group, relocated to San Francisco in 2008 to run that office. This year, the firm recruited former Cisco Systems Inc. vice president Charles Carmel.
Warburg joined Silver Lake in the Interactive Data acquisition in 2010.
--Editors: Josh Friedman, Larry Edelman
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To contact the reporter on this story: Cristina Alesci in New York at firstname.lastname@example.org
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