Silver Lake, the technology-focused private equity (PE) group famed for its successful takeover of Dell, has raised its largest fund to date with the final close on Silver Lake Partners VII at $20.5 billion.
As its seventh flagship PE fund, the new vehicle tops the $20 billion that the firm closed for Silver Lake Partners VI in early 2021 and its Silver Lake Partners V, which the firm closed in 2017 at $15 billion. Silver Lake itself, as the general partner, committed about $500 million each to the previous two vehicles.
Fund VII brings Silver Lake’s combined assets under management (AUM) and committed capital to approximately $102 billion. Its portfolio of companies represents over $1 trillion of cumulative enterprise value, said the firm in a statement.
The LPs of Fund VII include public and corporate pension funds, sovereign wealth funds, insurance companies, endowments, foundations, funds of funds (FOFs), family offices, tech industry leaders, and individual investors across the Americas, Asia-Pacific, Europe, the Middle East, and Africa.
‘Regret zone’
The fundraising success makes Silver Lake one of the world’s leading PE players managing to defy macro market challenges and continuing to attract limited partners (LPs) for their mega funds. Globally, PE fundraising remained difficult, slowing to $176.7 billion in the first quarter of 2024, down 10% from a year earlier, according to a PEI report.
With offices in North America, Europe, and Asia, Silver Lake invests across a wide spectrum of the global tech sector including sports and live events, media and entertainment, e-commerce, financial services, and healthcare.
New investments from Fund VII will see Silver Lake refocus on big takeovers and halts smaller minority investments that it believes have performed poorly in recent years, its co-chief executives Egon Durban and Greg Mondre told the Financial Times.
Silver Lake reportedly dubbed its array of subscale, pandemic-era minority growth tech investments as “the regret zone,” where the past few years’ surge in interest rates dampened valuations.
Its investments in the pandemic era include Indian edtech giant BYJU’s, in which Silver Lake led a deal of $500 million in 2020 that valued it at $10.8 billion. BYJU’s valuation reached $22 billion in 2022, before a significant drop to $250 million as of April, according to Reuters, amid an auditor exit, regulatory probes, and calls from its investors to oust its CEO Byju Raveendran for mismanagement.
“In 2021 we made a number of subscale, passive, minority growth investments. We were very active. Today, those assets represent only around 3% of the net asset value in our portfolio and we’ve eliminated subscale, passive, minority growth investing,” Durban told the FT.
Since early 2023, distributions to Silver Lake’s investors, including anticipated proceeds based on portfolio company transaction agreements signed as of early May, will total about $20 billion, the firm claims. This amount is anchored by the $69-billion sale of its cloud computing portfolio firm VMware to chipmaker Broadcom in November 2023.
This landmark acquisition helped Silver Lake average a 21% annual net return after fees on its funds since 2009.
Across Asia-Pacific, where it operates from offices in Singapore and Hong Kong, Silver Lake has made investments in some of the region’s most valuable companies including China’s Alibaba Group.
It first invested in Alibaba in 2011, about three years before the e-commerce giant debuted on the New York Stock Exchange with its $25-billion initial public offering (IPO). It fully exited from the Chinese firm in 2020, the year following Alibaba’s HK$101 billion ($12.9 billion) listing in Hong Kong.
Silver Lake also sold all its shares in Chinese travel services provider Trip.com and after-school tutoring firm TAL Education Group in the past few years. But it remains invested in artificial intelligence (AI) company SenseTime, Alibaba’s fintech spinoff Ant Group, and ride-hailing giant Didi Global in China, according to its website.