Secondaries specialist Coller Capital has joined forces with the Lucent corporate venturing team and has acquired an 80 per cent interest in a direct portfolio of technology investments formerly owned by Lucent Technologies. The transaction is Coller’s third largest deal after the acquisition of NatWest’s $1 billion private equity portfolio and its purchase of Shell Pension Trust’s private equity business, valued at $265 million. The deal also marks Coller Capital’s first foray into direct investments and the firm has already said that it will commit a minimum amount to the creation of a new fund to be launched by the management team at a later date.
The renamed New Venture Partners II LP was previously managed by Lucent New Ventures Group and comprises investments in 27 companies within the technology sector. Lucent originally invested $100 million in the venture and a source close to the deal said Coller acquired the portfolio at a substantial discount. Lucent will retain a 20 per cent interest in the portfolio. Seven key members of the 15-strong management team are being kept on to manage the fund, each of who holds a stake in the business.
The venture was established in 1997, taking technology innovations from Bell Labs and growing them into independent companies. The portfolio includes companies such as iBiquity Digital; Celiant, a supplier of wireless base station amplifiers in the US and Intrado, a provider of systems and services for network databases that route emergency 911 calls to public safety answering points.
Bill O’Shea, president, Bell Labs and executive vice president, corporate strategy and marketing, said: “The creation of an independent company to manage this portfolio will better position the portfolio companies for better success and growth, while allowing Lucent to focus its management attention and resources on innovations for our large service provider customers.”
Denis Mortier, investment director at Coller Capital, said: “The relationship with Lucent is an advantage. Lucent still retains a 20 per cent interest in the new fund and so the companies still have the advantage of being in a corporate entity.” He added that the management team is keen to raise a new fund in the future, but will be unable to start fund raising until it has reached certain targets specified by Coller regarding the current portfolio. Out of the 27 companies in the portfolio, the team will be focusing on 17. Mortier says that five, in particular, promise some attractive returns in the near future.
Secondary players such as Coller are providing some great exit opportunities for GPs in what is a tough exit environment. Mortier said the acquisition of a corporate venture capital portfolio is an exciting challenge. “I think we are well-equipped to do it it is one of our most promising areas. The most difficult challenge is building a team, but Coller already has a strong team in place from Lucent. The team has a strong financial interest in the current portfolio and also has a strong will to raise a fund in the future.”
The current fund has specific allocations for follow-on investments and also has the capability of making new investments, but only a very limited amount, said Mortier. “Our main aim is to manage the existing portfolio and to exit as well and as soon as possible.”
Mortier adds that there is a lot of potential emanating from the corporate venturing market. “There are already some similar transactions that we are looking at and discussing and there are some big companies in the US and some in Europe with some exciting investment opportunities.”
Jeremy Coller, chief executive of Coller Capital, said: “Over the past 18 months, we have analysed more than 100 opportunities to buy into private equity portfolios, but walked away from them all, just waiting for an opportunity like this.” Mortier added: “We were extremely happy to find a portfolio which fitted our criteria mature companies to exit quickly. In the past we have returned money back to investors within two and a half years, but in this case it may be much sooner, even within a year.”