Bono Raises Profile of Elevation Partners

When news broke last week that rock star Bono would join a new private equity fund called Elevation Partners, a lot of people said, “huh?”

But it makes perfect sense, according to a source familiar with the situation. Bono, who fronts the Irish band U2, has known Silicon Valley private equity investor and Elevation Partners co-founder Roger McNamee for a couple of years. McNamee, who plays guitar in a band called the Flying Other Brothers, has been involved with the entertainment industry and Bono once sought his advice on a deal, the source says.

McNamee declined to comment. Exactly who called who about Elevation Partners is unclear. What is certain is that the Irish rocker’s interest in the fund has less to do with private equity than the fund’s focus.

“The basic thesis is that the entertainment business is big and growing, but it’s being attacked by technology,” the source says. “Most of the entertainment managers are afraid of technology and have taken a defensive position.”

In contrast, Elevation Partners wants to “help the companies they invest in embrace technology and exploit their intellectual property assets,” the source says. The fund also hopes to apply “modern management techniques” to improve the entertainment business.

Elevation Partners – which plans to raise a $1 billion fund – will largely do buyouts, but it will also have the flexibility to infuse capital into distressed public companies and buy catalogues of music and videos. It has no plans to do venture capital deals.

The fund expects to hold a first close by the end of summer and raise the bulk of its money by the end of the year. It just started making the rounds with potential investors and has hired Merrill Lynch to act as its placement agent.

Even though it hasn’t held a first close yet, Elevation Partners is already looking at deals. In fact, Bono has brought “several” potential deals to the table, the source says. It typically takes months to put a buyout deal together, so Elevation Partners hopes to have some deals ready to fund after its holds its first close.

Besides Bono and McNamee, the managing directors of the fund are Fred Anderson, former CFO of Apple Computer, John Riccitiello, former president of video game maker Electronic Arts, Mark Bodnick, a founding principal of buyout fund Silver Lake Partners (along with McNamee), and Bret Pearlman, former senior managing director of buyout shop The Blackstone Group.

“When they decided to attack the market, they wanted people who had different talents, like different musical instruments,” the source says. Anderson and Riccitiello are the fund’s “operating guys,” Bodnick and Pearlman are seasoned buyout investors, McNamee is the “investment visionary,” and Bono is the “domain guy,” he notes.

As the domain expert, the 44-year-old Bono will be called on to source deals, do due diligence on people, companies and entertainment properties, recruit talent and impart his overall vision about the industry. He will also advise management and talent of entertainment companies that Elevation Partners becomes involved with. All of the partners in the fund will have an equal share of the carry.

Bono is used to strange couplings. In 2002, he and former U.S. Secretary Treasurer Paul O’Neill went on a fact-finding trip in Africa. But it is unlikely that Bono – who’s real name is Paul David Hewson – will show up for traditional Monday morning partnership meetings. However, “he will be kept apprised of things that they’re working on, and as a member of the investment committee he’ll vote on any potential investments with the rest of the team,” the source says.

Bono doesn’t have a lot of free time. He and his bandmates are finishing U2’s next album and they plan to tour next year. No word on whether McNamee will be tapped as a backup if the band’s guitarist, The Edge, gets sick.