SIlverLake Partners; Buyout, Late Stage Growth or both?
I noticed that Silver Lake Partners pursues "large-scale private investments in companies within the technology, tech-enabled and related growth industries" but that it seems from looking at their portfolio they do a combination of buyout (Dell) and late stage growth (Groupon, Ancenstry).
Is this fund the best of both worlds if you are interested in late stage VC and buyout? Do the associates work on both type of deals?
Thanks,
Note: this is secondhand info.
Silver Lake is investing out of a $15 billion large-cap PE fund, which means it needs to deploy enough capital to meaningfully generate returns to LPs. It's never going to do that by writing $50 million growth equity checks, so it will participate selectively in high conviction, large growth rounds (which were relatively rare until Softbank came around, and are still rare now at reasonable valuations). For the most part, it makes more sense for Silver Lake to write larger checks for take-privates and control transactions.
There are a few truly stage-agnostic firms that participate meaningfully in control and later-stage investments, including Insight Venture Partners (mostly growth), Warburg Pincus (most applicable in this case), TPG and Apax (among others). Notably, TPG's tech buyout team invests in minority high growth rounds (instead of TPG Growth team, even though the investment itself may come out of the Growth fund's capital), Apax and KKR invest in growth but participate out of a separate fund and use a separate team.
Lots of late-stage VCs (Insight, TCV, Summit, TA, etc.) will look at both buyout and growth deals, but are generally more selective about which buyout transactions they choose to pursue.
I understand the fund economics for buyouts vs. growth stage investments when it comes to large tech-focused funds (TCV, Insight, etc.), but could you touch on the more nuanced approach to buyouts? I am more familiar with traditional growth, but would like to learn more about the tech buyout space. For example, are they always highly levered to physically deploy less capital? If so, does that defeat the fund economics of buyouts? - just a noob trying to learn more
I second the above. Growth investments will not move the needle for them. They might pursue more growth oriented buyouts than other players but I have never come across SL (except of their spinoffs and energy funds) in the real "growth" space.
I would add to the list above also Riverwood, Siris and GA who can do growth and buyout'y deals...
LDNBNKR Great addition of Siris. They just did a really cool multi-leg deal buying Intralinks from Synchronoss (a company they were already the largest [but non-control] investor in) and also investing a further $185m into a convertible preferred instrument in Synchronoss. Pretty sure it's public at this point.
Silver Lake has many different strategies including venture debt with Silver Lake Waterman and lower middle market buyout / growth with the former Silver Lake Sumeru which spun out into Sumeru Equity Partners. This allows the flagship, Silver Lake Partners, to focus on largescale tech buyouts as mentioned by 7xEBITDA. Bottom line, they are just like any other tech investing giant (TPG, Bain, etc.) in that they can play across the capital structure in all types of investments depending on pockets of capital etc. Difference is Bain, unlike TPG and Silver Lake, does not segregate fund strategies and someone may be tossing ~$500k in a seed round or $200MM+ in a large growth equity round.
Thanks for your insight. Could you confirm your source on Bain investing from $500k seed rounds to $200MM+ growth equity?Also, Is there a reason why they do it or is it something they take pride in that they can invest across capital structure/stage from the same fund?
That's mainly from friends at the junior to mid levels (Analyst -> VP). I would imagine at the higher levels, MD's are more specialized etc. Also, I have no idea on fund structure, they could have separate funds with the same junior deal team across strategies. From what I understand, they use more of a geographic coverage approach with junior teams assigned to specific regions/cities.
I have different knowledge than Mephistopheles.
I haven't worked at Bain. A kid who sat next to me forever ago in my summer analyst class declined the return offer and went to Bain PE in Boston. I am currently on a board with a guy from BCV, and amusingly, someone I worked with previously at a different firm is in a more junior role working exclusively with that partner solely on his focal industry. Small world after all.
I've also had Bain Credit as well as Bain Double Impact as finalists in processes on other assets, so amusingly this is one of the firms I probably have the fullest 360° view on.
When you hear Bain can write $500k-500m checks, realize that that's done by entirely different sleeves of the firm.
Bain Capital Ventures (run by Matt Harris) just raised a $1b fund. They've got it siloed into a $650m main fund, $250m opportunistic follow-on vehicle, and a 10% GP commit that can go into either of the prior vehicles. Historically BCV was much more of a Series B-C shop, but in the past five-ish years they've really reversed that and spent a ton more time doing Series A and even seed.
Bain Capital (the flagship buyout strategy) does buyouts.
The teams may collaborate to trade industry or sector knowledge or models or other materials, but from everything I have seen being in their offices (for different sleeves of the firm), you aren't cross-staffed as an employee.
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SL runs a bunch of funds with varying strategies across the lifecycle of portfolio companies, so it's not about moving the needle at the consolidated level. Each fund is measured at the strategy level (portfolio companies are clearly organized by strategy on its website). As far as what makes a good late stage tech LBO, it's no different from really what makes any good LBO - predictability of CF generation so you can slap on a high amount of leverage.
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