Accel-KKR Fund II Closing Above $300M

Firm: Accel-KKR

Fund: Accel-KKR Capital Partners II

Target amount: $250 million

Amount raised: More than $300 million

Placement agent: None

Editor’s Note: The following story was corrected on December 18.

has closed on at least $300 million for a technology buyout fund, its first raised from a diverse base of institutional investors, Buyouts has learned. The Menlo Park, Calif.-based firm was formed in 2000 by venture firm Accel Partners and buyout firm Kohlberg Kravis Roberts & Co.

An investor in the fund had expected the firm to close on $300 million on Nov. 10. However, a second source says that the firm has raised more than $300 million for the partnership, ahead of its initial target. The firm set out to raise Accel-KKR Capital Partners II this spring. Accel-KKR declined to comment on its fundraising.

It’s unclear exactly what that initial target was. The investor in the fund pegs it at $250 million. Buyouts reported at the time of launch that the firm had a goal of $400 million (see Buyouts, Feb. 28, 2005), based on its having filed SEC documents for two affiliated funds, each stating a fundraising target of $200 million; however, a source close to the firm says that Accel-KKR in fact filed only a single plan with the SEC to raise a $200 million fund. SEC filings are not definitive sources for a fund’s goals, but can often provide a blueprint for a firm’s fundraising effort. Firms may list their actual fundraising goal or may list the maximum amount of capital they will accept for a given fund. Also, these goals and caps can often change during the course of fundraising.

When the joint venture was launched, before the tech bubble burst, KKR told Buyouts that the firm planned to avoid pure dot-com business models in favor of companies that were combining brick-and-mortar businesses with online opportunities. KKR and Accel provided equal amounts of funding for the venture, believed to total $300 million to $400 million. KKR used its own capital rather than money from its fund so as to not stray from its buyout mandate (Buyouts, March 6, 2000).

Accel-KKR invests mostly in technology companies with between $15 million to $150 million in revenue. It acquires non-core tech assets from public companies, buys and recaps private companies, and takes small and micro-cap companies private. This is the strategy the firm adopted around 2002 after the hybrid tech venture/buyout model proved less popular with investors.

The firm has remained active throughout its fundraising. Accel-KKR invested $54 million in testing software provider Applied Predictive Technologies in September. It is a company that is already in the firm’s portfolio. Accel-KKR’s portfolio includes supply chain software and service provider iTradeNetwork, revenue-execution software provider Model N and government software and service provider Saber.

In August, Accel-KKR opened an Atlanta office, which is run by managing director Rob Palumbo (see Buyouts, Aug. 7, 2006). The firm is headquartered in Menlo Park, Calif. and has three managing directors, one principal, one vice president and two associates.—M.S.