Tech Consultants Turn PE Investors –

One more private equity firm is looking to get into the business of turning around middle-market technology companies that other financial sponsors just can’t stomach. Although the firm has been around for a while, it has now raised a pledge fund to start making investments.

TenX Capital Partners was started by Michael Green in 1999 after Green’s computer consulting group, triSpan Internet Commerce Solutions, was bought out by Answerthink Inc. Initially, Green’s vision for TenX included working with other private equity firms such as T.H. Lee Putnam Ventures, Catterton Partners and GE Equity to help revive their troubled tech investments. TenX would send its operating partners into these portfolio companies and work with the management team to improve the company’s operations and profitability.

But as the consulting firm engaged in bigger and bigger deals with other private equity heavyweights such as New York-based Cerberus Capital Management LP, Green decided to expand TenX’s role and take equity stakes in the companies that it was involved in. The firm recently gathered capital from LPs to begin acquiring mid-market telecom and software-related companies with enterprise values of $20 million to $100 million. The firm is currently looking at second-and third-tier properties that supply software switching components and electronics to the telephone and telecom industry.

Green described his firm as a hybrid between a financial and strategic buyer. “We typically target underperforming assets, and many times we’re doing carve-outs from larger companies that are divesting themselves of non-core assets,” Green said. “For the area that we’re in there’s an opportunity for people who aren’t afraid to get their hands very dirty and get inside these companies. Tech and telecom are complex areas, but we’ve been there, and we’re not afraid to take on companies that need a lot of work.”

The current malaise in the technology sector is making for attractive deal flow for the deal-thirsty firm. “This is a very opportunity-rich environment, and we’re quite busy,” said Green. “There are good, solid underperforming assets that we think we can operate back to health.”

In addition to sourcing its own deals, TenX will continue to partner up with other private equity firms to help improve their portfolio companies. Green anticipates TenX doing three-to-four deals per year with its 15 partners being involved in a deal anywhere from a year to 18 months. “It’s kind of a nice niche,” he said.