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Silver Lake Close to Raising $10B Fund

(Reuters) – Silver Lake Partners, the technology-focused private equity firm backing a $24.4 billion bid to take Dell Inc private, is close to raising $10 billion for its latest fund, exceeding its initial fundraising target on strong investor demand, a person familiar with the matter said on Thursday.

Silver Lake’s fundraising performance indicates strong investor confidence in the firm at a time when it is trying to pull off the largest leveraged buyout since the financial crisis through its participation in Michael Dell’s consortium that has offered to take the world’s No. 3 PC maker private.

Silver Lake Partners IV, a private equity fund which started fundraising last year with a target of $7.5 billion, may complete fundraising this month, said the person on condition of anonymity because the process is confidential.

Silver Lake has delivered a gross internal rate of return of 27 percent and a net internal rate of return (IRR) of 18 percent overall since its inception, according to the person.

Its previous fund, the $9.3 billion Silver Lake Partners III, which launched in 2007, was valued at 1.37 times 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.

A Silver Lake spokesman declined to comment.

There are 264 buyout funds in the market seeking a total of $232 billion, up significantly from the 236 funds seeking a total of $181 billion at the start of 2012, according to market research firm Preqin.

Such competition is driving private equity investors into consolidating their relationships with funds and trying to pick a few winners in any particular strategy rather than placing multiple bets in the same area of the market.

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.

Warburg Pincus LLC is targeting $12 billion for its latest buyout fund, down from $15 billion from its previous fund. Apollo Global Management LLC is also looking to raise $12 billion for its latest buyout fund after previously raising $14.7 billion.

Silver Lake, whose best known investments include Skype and Chinese e-commerce company Alibaba Group, was founded in 1999 by Glenn Hutchins, Jim Davidson and David Roux and specializes in private equity deals in technology.

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 3.1 times its investors money, according to the New Jersey public pension fund.

Raising $10 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 is 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.

Dell on Monday agreed to give Carl Icahn a closer look at its books, less than a week after the activist investor joined a growing chorus of opposition to founder Michael Dell’s plan to take the company private. A “go-shop” period that allows Dell to solicit offers from other interested parties expires on March 22.

(Reporting by Greg Roumeliotis in New York; Editing by Chizu Nomiyama and David Gregorio)