Glenn Hutchins, David Roux and Jim Davidson, who co-founded Silver Lake 13 years ago and built it into the largest technology-focused private-equity manager, will reduce their ownership as part of a broader leadership transition, according to two people briefed on the matter.
Silver Lake, based in Menlo Park, California, will form a five-member managing committee, comprised of Davidson and four younger managing directors, according to one of the people. Roux, the firm’s 55-year-old chairman, and Hutchins co-chief executive officer with Davidson, will play a less active role in day-to-day management, said the people, who asked not to be named because the information is private.
Silver Lake, which made a threefold profit this year when it sold Skype Technologies SA to Microsoft Corp., is broadening ownership and reducing reliance on the founders as it prepares to raise its fourth flagship investment pool. Longtime investors, including California Public Employees’ Retirement System, which backed Silver Lake since its first and most successful fund in 1999, will have to decide whether to support the younger ranks of deal makers when the new fund will be formally marketed in February, according to one of the people.
Davidson, 52, is the only member of the current executive management to join the new managing committee. Egon Durban, Mike Bingle, Ken Hao and Greg Mondre will join Davidson on the committee and take a bigger ownership stake, said the people.
Gemma Hart, a spokeswoman for the firm, declined to comment.
While competitors KKR & Co. (KKR) and Providence Equity Partners Inc. are setting more modest targets for their new funds, Silver Lake is seeking to raise a similar size fund as its $9.4 billion predecessor pool. The firm, which invested in new internet companies including Zynga Inc. and Groupon Inc. through its last fund that was intended to focus on large companies, has set a preliminary target of $8.5 billion to $10 billion, according to a person familiar with the plans.
To win over clients, the firm is using its recent bid for a stake in Internet company Yahoo! Inc. to show that it’s a preferred investor among technology companies, according to one person. The firm is saying Yahoo! prefers Silver Lake as a partner over TPG Capital, because of its expertise.
Silver Lake, working with Microsoft, venture-capital firm Andreessen Horowitz and Canada Pension Plan Investment Board, offered to buy a minority stake in Yahoo! for about $16.60, people familiar with the bidding said last month. That’s less than an offer made by private-equity firm TPG, two people said.
Silver Lake invested about $1.3 billion in capital this year, including about $350 million to $365 million in Web registration and hosting company Go Daddy Group Inc. and about $328 million in Chinese Internet giant Alibaba Group Holding Ltd., according to an investor presentation.
The firm distributed $6.3 billion to clients across its three funds this year. It bought Internet-calling service Skype in November 2009 and sold it 18 months later to Microsoft for $8.5 billion.
Hutchins, 56, Davidson and Roux formed Silver Lake in 1999 with Roger McNamee. Silver Lake Partners I generated an annual rate of return of 25 percent, net of fees. Subsequent pools, Silver Lake Partners II in 2004 and Silver Lake Partners III in 2007, yielded 10 percent and 19 percent, according to the presentation.
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