Investcorp closes $500m technology fund

01 March 2008

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Fund

Investcorp Technology Partners has closed its third fund, Investcorp Technology Partners III LP (ITP III) with commitments totalling $500m. The fund was launched in March/April 2007 with a target of $400m and closed over-subscribed on its hard cap in January 2008. ITP III follows Investcorp Technology Ventures II, which closed in 2005 on $300m and is now 70% invested, with the remaining capital held back for follow-on investments in portfolio companies. The terms and conditions of the New York- and London-based fund were described as plain vanilla with the ITP team contributing in excess of $11m to the vehicle. The nature of the deals targeted by ITP III, that is less leveraged and of a growth capital nature, means that Investcorp believes that prospects for its latest fund are bright despite the current lending environment. Investcorp anticipates completing a higher proportion of deals with LP co-investment from ITP III than from previous funds and noted that during the fundraising process, LP appetite for co-investment was strong.

Investors

The overwhelming majority of investors from Investcorp's second technology fund committed to ITP III alongside new investors including California Public Employees Retirement System (CalPERS), Cornell University and Bank of Scotland. This is understood to be one of the first commitments CalPERS has made to a technology, small- to mid-cap private equity fund. There were between 45 and 55 investors in ITP III in total. The Doris Duke Charitable Foundation, QVT Financial LP and Broward Health in the US, and AlpInvest Partners, CNP Assurances SA and UBS Sauerborn in Europe, were among the other investors in the fund.

Investments

ITP III will follow the strategy of its predecessor fund, focusing on three types of transactions, buyouts, corporate carveouts and public situations (take privates and control-oriented PIPEs) in four key areas of the technology market: mobile data applications, enterprise software, communications infrastructure and digital content enablement. ITP will target companies in the US and Europe and does not have geographical allocation guidelines. Historically, Investcorp Technology Partners has been very active in Europe and intends to continue its success on the Continent. "We find that the space in which we operate is less competitive in Europe than in the US in terms of numbers of players," comments Investcorp managing director Hazem Ben-Gacem. "In Europe there are lots of opportunities for value creation through best practice methods and so on. However, the US is a substantially larger market and for every one good value deal in Europe there are four such opportunities in the US," he says. The fund will aim to make 10-12 deals in total, writing equity cheques of $25-50m and targeting companies with an enterprise value of $50-250m. In Europe, Investcorp Technology Partners' main focus is on the core markets of the UK, Germany and Scandinavia, where it expects to do 80% of its European deals.

ITP III has already completed its first deal, acquiring a 25% shareholding in Frankfurt-listed Utimaco, a Germany-based data security company. The current market capitalisation of Utimaco values Investcorp Technology Partners' stake at approximately EUR40m. Investcorp had previously been a shareholder in the business from 2003-2005.

People

There are 10 executives in Investcorp Technology Partners' investment team. Hazem Ben-Gacem is the main manager of the fund in Europe.

Name: Investcorp Technology Partners III LP

Closed on: $500m

Focus: US, Europe technology buyouts

Contact: Hazem Ben-Gacem

Address: Investcorp International Ltd, 48 Grosvenor Street, London W1K 3HW

Tel: +44 20 7629 6600

Fax: +44 20 7499 0371.