BREAKINGVIEWS-Tech fund overflow may swamp deal discipline

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(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Lauren Silva LaughlinDALLAS, April 20 (Reuters Breakingviews) -
T echnology-focused private-equity investors are planning on
setting some records. Silver Lake just raised a $15 billion
fund. Other buyout firms have newly stocked war chests, and
Japan's SoftBank <9984.T> has launched a fund that could get as
big as $100 billion. Silver Lake and many rivals know their
patch. But there are only so many SoFis - one of the firm's
holdings - and even fewer Dells [DI.UL]. Investment discipline
could be tested.
    Silver Lake's fund is the largest U.S. tech fund on record,
according to data from Thomson Reuters. Combine it with
SoftBank's ambitious target and recent funds from Vista Equity
Partners and Thoma Bravo, and these four alone have more than
$130 billion to deploy. Assuming they write equity checks for 40
percent of transaction values and borrow the rest - roughly the
leverage Thomson Reuters LPC pegged for deals last year - they
will have perhaps $330 billion of firepower.
    That's enough to cover the price Silver Lake and its
partners paid for Dell (now Dell Technologies) in 2013 some 13
times over, or to acquire a wooly mammoth like, say, IBM <IBM.N>
with almost enough left over to do it again. Most deals are far
smaller, though, and many involve partners. Silver Lake and
Thoma Bravo bought SolarWinds for $4.5 billion last year, for
    The biggest deals are scarce and may need to be shared,
while more manageable bites attract more competing buyers. It's
already becoming an expensive business. The Nasdaq 100
technology-sector stock-price index has more than doubled in
five years, and the median price-to-EBITDA multiple in
tech-sector deals was 37 percent higher last year than in 2012,
according to Thomson Reuters. Downturns after past tech bubbles
have left scars. The 2000 bust is famous, but the more recent
financial crisis took its toll, too.
    Silver Lake may use its fund to invest in companies in other
sectors looking to boost their tech credentials, an approach
which might make finding viable targets easier. Blackstone
<BX.N> boss Tony James said on Thursday that his firm has
invested recently in tech and likes such businesses. He added,
however, that the amount of money being earmarked for the
industry was "a little worrisome." He and other buyout veterans
know that too much capital plus too few deals often equals
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    - Silver Lake said on April 18 it had raised $15 billion for
a new fund focused on making technology-related investments. The
fund, the fifth in the firm's series, brought the private-equity
firm's combined assets under management and committed capital to
$39 billion. Silver Lake's current portfolio includes,, Broadcom, Dell Technologies, GoDaddy,
Motorola Solutions, Sabre, and SoFi, according to the firm.
    - SoftBank said in October the company would form a fund to
invest an initial $25 billion in technology over the next five
years. The potential size of the fund could reach $100 billion,
the company said. Led by Masayoshi Son, SoftBank is partnering
with Saudi Arabia's Public Investment Fund. The Japanese
company's current investments include an 83 percent stake in
U.S. cellular company Sprint <S.N>. It also invested in Alibaba
<BABA.N> in 2000. Last year it said it would sell a portion of
that stake to reduce debt.
    - Vista Equity Partners recently raised a $10.6 billion
private-equity fund to invest in technology deals, according to
the Financial Times. It was Vista's sixth fund.
    - Thoma Bravo closed Flagship Fund XII with $7.6 billion in
September. The private-equity firm plans to use the fund to
invest in technology and software companies.
    - For previous columns by the author, Reuters customers can
click on [SILVA/]

Silver Lake press release
SoftBank press release
Thoma Bravo press release
BREAKINGVIEWS-SoftBank loses focus with $100 bln Vision fund
BREAKINGVIEWS-Dell loss vindicates M&A price suits, bugs and all
 (Editing by Richard Beales and Martin Langfield)
 ((; Reuters Messaging:


This article appears in: World Markets , Stocks , Economy , Banking and Loans , Technology
Referenced Symbols: 9984 , BABA , BX , IBM , S

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