Silver Lake Raises $10.3B For Fund IV

The successful fundraising indicates confidence from investors in the buyout firm. The fund, Silver Lake Partners IV, started fundraising last year with a target of $7.5 billion. Sister news service Reuters reported in March that Silver Lake would exceed that and raise some $10 billion on strong demand.

“We received strong investor demand for this fund and are deeply gratified by the confidence in Silver Lake demonstrated by our limited partners, many of whom have been long-term investors with us,” the firm’s managing partners—Jim Davidson, Egon Durban, Ken Hao, Mike Bingle and Greg Mondre—said in a press release.

For the first time in Silver Lake’s history, the majority of the investors in the fund were based outside the United States, with a big inflow of money coming from Asia and the Middle East, according to a person familiar with the matter. All the top ten investors by capital that participated in Silver Lake’s previous fund also made commitments to the latest fund. Some $300 million was committed to the fund by Silver Lake fund managers and entities affiliated with them, the person said.

Silver Lake declined to comment.

Investors in Silver Lake’s funds include public and corporate pension funds, sovereign wealth funds, endowments, foundations, family offices and high net-worth individuals. Silver Lake, whose best known investments include Skype and Chinese e-commerce company Alibaba Group, was founded in 1999 by Davidson, Glenn Hutchins and David Roux.

In December 2011, before Silver Lake Partners IV was launched, Silver Lake promoted Bingle, Durban, Hao and Mondre, who had been with the firm for more than a decade, from managing directors to managing partners, as Hutchins joined Roux in taking a step back from active management.

Silver Lake has delivered a gross internal rate of return of 27 percent and a net IRR of 18 percent overall since its inception. Its previous fund, the $9.3 billion Silver Lake Partners III, which launched in 2007, was valued at 1.37x the amount that investors had put into it, and had a net IRR of 16.76 percent as of the end of September, according to the New Jersey Division of Investment.

Since the 2008 financial crisis, several private equity firms have launched funds that are smaller than their predecessors, making Silver Lake’s latest private equity fund an exception. Buyout funds raised $26 billion globally in the first quarter of 2013, a 44 percent increase from a year earlier, according to market research firm Preqin.

Skype is arguably one of Silver Lake’s most famous and successful deals. It sold the internet phone company to Microsoft Corp. for $8.5 billion in 2011 after buying it just 18 months earlier for $2.5 billion.

Silver Lake invested approximately $934 million in Skype and received $2.9 billion of cash proceeds at exit, a gross IRR of 75 percent and 3.1x its investors money, according to the New Jersey public pension fund.

Raising $10.3 billion will offer Silver Lake capacity to carry out some of the biggest deals in the sector. It has made its biggest equity commitment in its history by offering to invest $1.4 billion as part of the Dell deal, although it plans to sell down some of that commitment to its investors.

Greg Roumeliotis is a correspondent for Reuters in New York.