Silver Lake’s Egon Durban says company focused on ‘all-in bets’

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Silver Lake is focusing its investments on “big all-in bets” as one of the investors closest to Wall Street ramps up the ambition of its dealmaking operations amid hopes that more volatile markets will unearth bigger opportunities.

The technology-focused private equity group with $98 billion in assets has decided to focus on smaller but larger investments, such as the $12.5 billion acquisition of software company Qualtrix that closed Wednesday morning, co-chief executive Egon Durban said. Done.

“If you look at us investing now, it’s by definition going to be a big bet,” Durban told the Financial Times in a rare media interview. “You will see us doing this. , , A handful or two of big, really significant investments per year and that’s it.”

Durban’s comments stand in contrast to many of Silver Lake’s main private equity rivals which are focusing on smaller deals due to a sharp slowdown in deal activity following rising interest rates. But he said tighter financial conditions presented opportunities to support tech companies that were previously out of reach for private equity buyers.

“Our greatest success as an institution has been when we are large in terms of capital and committed resources,” he said.

Silver Lake’s €2.4 billion move to acquire Software AG, one of Europe’s biggest technology companies, moved forward this month after a rival bidder withdrew its attempt.

Silver Lake first invested more than $500 million in Qualtrix, which invented specialized software analytics tools that help companies respond to online customers, during the tech conglomerate’s 2021 initial public offering. Qualtrix shares soared in the months following the listing, valuing the company at nearly $30 billion, but fell by nearly two-thirds in the past year.

This provided an opportunity for the buyout group to assemble an acquiree who already had a large public stake and representation on the Qualtrix board. Durban also became close to Qualtrics founder and chairman Ryan Smith and its chief executive, Zig Serafin, who will continue to run the company.

In March Silver Lake agreed to pay $18.15 a share for Qualtrix, valuing it at $12.5 billion, or about 40 percent below its IPO price. The deal was finalized due to market turmoil during the Silicon Valley Bank failure and other potential bidders bowing out. Silver Lake arranged a large equity check to complete the acquisition without the need for heavy debt financing.

Silver Lake and its investors committed approximately $9 billion in cash to finance the purchase. CPP Investments, Canada’s largest pension fund, invested an additional $1.75 billion, while only $1.2 billion of the purchase price was financed by debt. The lack of leverage makes Qualtrics the largest investment in Silver Lake’s nearly quarter-century history.

Silver Lake said Wednesday it has raised $500 million for the Qualtrix deal from venture group Accel and $250 million from BDT and MSD Partners, the private capital group co-founded by former Goldman Sachs banker Byron Trott and computer billionaire Michael Dell. is itself investing $250mn.

Accel partner Ryan Sweeney, who backed Qualtrics as a start-up, called the deal “as close as possible.”

“It is unusual for us to invest with another firm, but we have a special relationship with Silver Lake,” said Greg Lemkau, co-chief executive officer of BDT and MSD.

Durban helped BDT and MSD co-founder Michael Dell privatize his personal computer company in a highly controversial deal in 2013. The hugely successful buyout cemented Silver Lake and Durban’s reputation for working with the founders to transform their businesses.

Durban said, “Qualtrix was sitting in plain sight.” The tech company’s majority owner, German software conglomerate SAP, announced plans to sell its investment earlier this year, prompting heavy private equity interest.

Smith will make a major investment in Qualtrix and is expected to play an active role in expanding the business through acquisitions and heavy investments in new technologies.

“At our size, these platforms very often or almost never come with the ability to be taken privately,” he said. Describing the deal’s lack of profit as attractive, he said: “We won’t have to work the first 15 days of the month to make our next interest payment.”