- Company claims 25 percent share of mid-market tech LBOs
- More sponsors becoming comfortable with tech holdings
- Maturing market is primed for buyouts, such as Dell
GE Capital, a unit of General Electric Co. of Fairfield, Conn., claims a 25 percent share of U.S. mid-market technology LBOs, after lending $500 million of senior debt last year. Christopher R. Hetterly, a managing director of technology and GE Capital’s team lead in the area, said the company had essentially doubled the number of deals that it participated in, doubled the number of deals that it led and doubled its market share between 2011 and 2012.
The top 15 private equity sponsors in the segment did 65 percent of tech LBO deals two years ago but only 50 percent of such deals in 2012, Hetterly said. As the IT industry has matured, it has become less the realm of venture capital or highly specialized firms and more a domain where a broader group of buyout shops can do business, Hetterly said. “We’ve still got plenty of opportunity out there.”
The tech lending team is part of GE Capital’s telecom, media and technology group; Hetterly is based in the firm’s Palo Alto office. The larger TMT group completed 58 deals totaling $3.7 billion during 2012, GE Capital announced in February. The group focuses on growth sectors, including cable, data centers, towers, metro fiber, TV, digital media and software, among others.
The environment for tech investing certainly has changed. Silver Lake, the tech investing specialist in Menlo Park, Calif., has been holding its own in the campaign to take computer maker Dell Inc. private, in a $24.4 million partnership with company founder Michael Dell. The Blackstone Group dropped out of the competition for the deal in April, but activist investor Carl Icahn, who has taken a significant stake in the company, may still be pursuing a competitive bid.
On the other hand, The Carlyle Group and Providence Equity Partners took a beating on the bank tech vendor Open Solutions Inc., which they had taken private in January 2007 in a $1.3 billion deal. The firms sold the asset in January to strategic investor Fiserv Inc. for $55 million and Fiserv assumed about $960 million of debt. Fiserv also received a tax asset with a net present value of about $165 million, the company said in announcing the deal.