Glenn Hutchins, the co-founder and managing director of technology LBO pioneer Silver Lake Partners discussed the future of private equity and technology in an interview with senior writer David Carey, kicking off Day 2 of The Deal's PC Symposium.
Silver Lake made a splash with its buyout of Seagate Technology in the teeth of the tech bubble's implosion, an investment that reaped monumental profits for the firm. Hutchins said that they were successful during the tech bust because they brought significant operational improvements to their portfolio companies.
"The main point is getting out the growth," Hutchins said. "You don't get growth because you happen to be there, you have to dig to get it out."
Tech LBOs are now driven by the number of factors:
- The rest of the PE industry is trying to add tech as a category. PE firms have raised a lot of money and now they're making tech companies a permanent part of their portfolios.
- There are many more mature tech companies - steady cash flow, ability to carry debt, etc. - now, that look a lot more like the types of companies PE firms typically invest in.
For its part, Sliver Lake is taking a different tact, and sticking to its basic strategy of focusing on businesses with unusually high growth opportunities.
KEY TRENDS
On the horizon, Hutchins sees Europe's tech market restructuring itself to look more like the U.S. market. Technology's global restructuring started in the U.S., has moved to Europe and is now just starting to take roots in Asia.
- More companies are deploying technology for mission-critical applications; they're using technology to drive their business and there is a new class of business, like Ameritrade and Sabre, that don't make technology, but that are totally reliant on it to deliver their product—both drivers for new opportunities.
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George White
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