SAN FRANCISCO (Reuters) - Vector Capital said on Wednesday it raised a $1.4 billion private equity fund, giving the U.S. buyout firm more firepower to pursue acquisitions in the technology sector as it faces increasing competition from rival investment firms.
The new fund comes as Vector vies for deals against bigger technology-focused private equity firms such as Vista Equity Partners Management LLC and Thoma Bravo LLC, while also competing with smaller peers such as Francisco Partners, Marlin Equity Partners and Siris Capital Group LLC.
Vector’s fifth fund was oversubscribed by $200 million, and is the largest to date for the San Francisco-based firm, which was spun off from Ziff Brothers Investments in 1997.
Vector’s previous fund, Vector Capital IV, was raised in 2007 and amassed $1.2 billon. It had a net internal rate of return of 14.4 percent and delivered a multiple on investment of 1.7 times as of the end of June, according to the most recent data available from one of its investors, the California Public Employees’ Retirement System (CalPERS).
By comparison, CalPERS’ private equity program delivered a net internal rate of return of 10.6 percent since inception to the end of June.
Alex Slusky, Vector’s founder and chief investment officer, said that Vector differentiates itself by investing in turnarounds that other buyout firms avoid.
“We focus on more complex projects that other private equity firms will not undertake,” Slusky said. “Investing in a contrarian manner gives us the opportunity to buy companies well below their intrinsic value.”
Last month, Vector lobbed a non-binding joint bid with private equity firm Clearlake Capital Group for Tangoe Inc TNGO.O, an expense management firm company with a market capitalization of $265 million that is facing delisting from the Nasdaq over accounting issues.
Vector was also one of the investment firms that tried to buy Yahoo Inc’s YHOO.O core internet business last year in an auction that was won by Verizon Communications Inc (VZ.N) for $4.8 billion, Reuters previously reported.
With its new fund, Vector will look to invest between $75 million to $150 million of equity in each deal, a slightly larger amount than its last fund. It may also invest through its smaller credit business.
Vector will target companies valued between $100 million and $2 billion, including debt, in North America, Europe and Israel. Vector still has some capital to invest from its last fund before it starts deploying its new fund, Slusky said.
Editing by Simon Cameron-Moore