Private equity firm Silver Lake Partners is preparing to seek at least $16 billion from investors for its sixth flagship buyout fund, braving the economic uncertainty of the coronavirus outbreak, according to people familiar with the matter.
Investing the money raised in the coming months could allow Silver Lake to snap up companies at depressed valuations, given the pandemic’s impact on the global economy, including the technology and media sectors that the private equity firm focuses on, the sources said.
Buyout funds typically return money to investors three to seven years following their fundraising, long after this pandemic is expected to have subsided. Nevertheless, concerns among institutional investors, such as public pension funds and insurance firms, about their liquidity amid the market turmoil will make Silver Lake’s fundraising a key test of buyout firms’ ability to fundraise during the crisis.
Silver Lake is preparing to start raising the new fund, Silver Lake Partners VI, in the second quarter, amassing between $16 billion to $18 billion, said the sources, who cautioned that the plans are still subject to change.
The sources declined to be identified because the preparations are confidential. Silver Lake declined to comment.
Last year, Blackstone Group Inc (BX.N), the world’s largest private equity firm, raised a $26 billion flagship buyout fund while Vista Equity Partners Management LLC raised $16 billion from investors for its seventh technology buyout fund. CVC Capital Partners Ltd is also raising up to 20 billion euros ($21.63 billion) for its latest buyout fund, which is expected to be the largest ever fund raised in Europe.
More than half a trillion dollars flowed into technology-focused buyout funds, including Silver Lake, between 2008 and 2018, according to data provider Preqin, helping to support dealmaking among companies in software, social media, and cybersecurity.
Silver Lake has $43 billion in assets under management, and its portfolio of companies includes social media firm Twitter Inc (TWTR.N), computer hardware maker Dell Technologies Inc (DELL.N), and movie theater chain AMC Entertainment Holdings Inc (AMC.N), according to its website.
Silver Lake raised $15 billion from investors in 2017 for its fifth buyout fund. That fund had an initial target of $12.5 billion, and as of the end of December 2018 had delivered an internal rate of return (IRR) of 11%, according to the website of Minnesota State Board of Investment, one of Silver Lake’s investors.
The prior $10.3 billion fund, Silver Lake Partners IV, had delivered an IRR of 24.4% as of the end of December, according to the Minnesota State Board of Investment. By comparison, the Minnesota State Board of Investment’s entire private equity portfolio delivered an IRR of 12.5%.