Dealmaker: Silver Lake's New Four Amigos

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ACQUIRING MINDS

SEPTEMBER 2007

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(From left) Ken Hao, Mike Bingle, Greg Mondre, Egon Durban

Inside the Deal Shop SILVER LAKE’S NEW FOUR AMIGOS 259862.qxd:DM 9/10/07 11:33 AM Page 99

A QUARTET OF INVESTING LEGENDS FOUNDED SILVER LAKE EIGHT YEARS AGO. NOW A NEW FOURSOME, NONE YET 40, LOOKS TO CONTINUE THE FIRM’S TECH DOMINANCE BY ERICA COPULSKY

e should have price. Mondre, 31 at the time, able to line up new partners to been out cele - and Durban, 32, who had salvage the deal.” brating. That quarterbacked the deal since Silver Lake’s success in thought was its inception, had just received pulling off a feat worthy of Hou- Won the minds word from SunGard’s board: dini is a testament to the firm’s of Greg Mondre and Egon Accept the price within 48 credibility as the leader in the Durban, two young partners hours or the deal is off the table. technology-buyout space. It also with Silver Lake, as they holed Left with just KKR’s muscle underscores the newfound clout up in an empty conference to help make the deal happen, and capabilities of the quartet of most important deals — helping room in the firm’s office on 57th the Silver Lake team began young executives — Mondre, line up investors, creating com- Street in Manhattan two years “dialing for dollars,” as one 33; Bingle, 35; Durban, 34; and plex financial structures and ago this past March, the sunset insider puts it. From late that Hao, 39 — all of whom have leading the deal negotiations on view over Central Park doing evening into the next morning, been at Silver Lake from, or behalf of the company — and little to quell their uneasy feeling they worked the phones. Mon- near, the very beginning. (Mon- taking on day-to-day operating that a blockbuster transaction dre called the banks asking for dre recalls picking out office fur- responsibilities within the had suddenly fallen apart. more money, while Durban niture with Hutchins and setting organi zation, as Silver Lake’s It had seemed like a done tried to round up additional up phone lines; Durban was at founders look to manage a larger deal: the buyout — by a seven- private-equity firms to fill the cofounder David Roux’s house and increasingly global business. firm private-equity consortium vacant seats. They brought all shooting baskets with his kids Last month, the firm’s top brass led by Silver Lake — of soft- hands on deck, an indication of while creating the company’s assigned geographical oversight ware technology vendor Sun- the SunGard deal’s importance slide presentations.) The four of various businesses to the Gard Data Systems for $11.3 to Silver Lake: Mondre and have grown up with the firm, young partners: Mondre and billion, which would have been, Durban drew on the expertise and in turn they rate among the Bingle will oversee North Amer- at the time, the second-biggest and contacts of fellow partners most-touted players on Dealmak- ica; Durban, London; and Hao LBO ever (behind only Kohl - Mike Bingle and Ken Hao, er’s 40 Under 40 list. will soon relocate to Hong Kong berg Kravis Roberts’s legen - who were involved in early “By virtue of Silver Lake’s to take charge of Asia. “We pride dary RJR Nabisco buyout). due-diligence meetings and structure and the unique cul- ourselves on being a strict meri- After four months of grueling familiar with the intricacies of ture of the firm, our experience tocracy,” Roux says. “If you’re back-and-forth negotiations, the deal. Even the buyout firm’s is a lot greater than our age good at what you do, you’re the deal was all but wrapped cofounder Glenn Hutchins would suggest,” Mondre says. going to get a chance to do more, up, an announcement set for made a few calls on the fly. Outsiders agree. “I would and if you contribute to the suc- later that week. But when news By the time the deadline compare the Silver Lake folks cess of the firm, you’re going to broke the previous morning arrived, Silver Lake had with the best of the best deal- get more responsibility.” about the impending buyout, brought back all but two origi- makers, from originating While these stars have sky- SunGard’s stock soared, and nal members of the team — transactions to bringing them rocketed through the private- now five members of the con- the Carlyle Group and to fruition,” says Boon Sim, equity ranks to become among sortium were balking at the Thomas H. Lee Partners — Credit Suisse Group’s merger the most accomplished and and replaced them with deep- chief for the Americas, who has talented in their industry, pocketed Goldman Sachs Cap- sat across the table from them their ascent dates to the firm’s ital Partners and Providence on deals including SunGard. origins, when it first hit the Equity Partners. “It was a great “The difference between them buyout scene eight years ago. mo ment in Silver Lake’s his - and their contemporaries is Founded by Hutchins, an LBO tory,” says one executive who they’re strategic in their think- maestro from Blackstone worked on the transaction. ing, very patient and mature Group; Roux, a one-time “These guys stuck to their price beyond their age.” senior executive at Oracle rather than adhere to the pres- Increasingly, the foursome and Lotus; former investment sure, and within two days were is taking the reins for the firm’s banker James Davidson, of 259862.qxd:DM 9/10/07 11:33 AM Page 100

tech boutique Hambrecht & They began cherry-picking that everyone needs to work Quist; and Roger McNamee, young talent to join their jun- together to be successful. That a top Silicon Valley investor ior ranks. Durban, one of Sil- ethos is embedded in the firm’s (who has since left the firm), the ver Lake’s founding principals, compensation scheme, in first-generation “four amigos” came from Morgan Stanley’s which everyone generally is cemented their partnership West Coast tech team, where paid based on the fund’s over- just before Christmas 1998 on a he had trained under Frank all performance rather than by ski trip to Deer Valley, Utah, Quattrone and later catered to who works on which deal. As while on a run above Silver private-equity clients. (“He’s Hutchins says, “[Client] rela- Lake Village. By May 1999, sort of like the fifth Beatle — tionships are part of the firm, they had raised $2.3 billion he just moved in and never not the individual.” from an all-star lineup of tech left,” Roux jokes.) He in turn Even Silver Lake’s offices, heavyweights such as Larry helped recruit Mondre, who in New York and Menlo Park, Ellison, Michael Dell and Bill had been one of his buyout cross-train them as well as California, are designed to fos- Gates, as well as corporate clients at Texas Pacific Group. move them internally.” ter teamwork. Contemporary pension funds and university The fol lowing year, the firm Steering clear of the invest- and well-appointed with light endowments. They built their added Hao, a protégé of ment-bank model of internal wood that lends a clean, infor- firm on a new approach to Davidson’s at H&Q, and Bin- com petition and short-term mal feel, the spaces feature glass technology investing: LBOs of gle, a Duke engineering-school compensation incentive that offices with an open core. The underappreciated — yet graduate who had been exe- many private-equity firms open, airy, welcoming environ- mature — tech companies. cuting buyouts at Apollo. Soon have adopted, Silver Lake ment is intended to promote Silver Lake is known for its enough, this new team of ris- operates under the premise interaction among colleagues. innovative focus on technology, ing buyout stars — who some at the time an underserved mar- have taken to calling the New ket for private equity. “The orig- Four Amigos — were drawing SILVER LAKE: inal plan was to hire a group of on one another’s expertise and THE NEXT GENERATION people who thought of their collaborating on deals when- next job as their last job,” Roux ever they could. MIKE BINGLE, 35, a former principal at Apollo Advisors, has says. “The criteria were to have “What’s good about this,” worked on several of Silver Lake’s financial-services deals and smarts, a great attitude — Durban says, “is that from the was a key figure in its Instinet buyout and subsequent sale. “Sil- because personal chemistry is outset, each of us had exposure ver Lake’s Instinet LBO should go down as one of the greatest really important — and passion to every aspect of the invest- of all time, and Mike Bingle made it happen,” says Evercore for technology. The shorthand ment process — from sourcing Partners’ Jane Wheeler. Bingle, an Indianapolis native, serves for what we were looking for and investment analysis to deal on the boards of Gartner and IPC Systems. was BYA — best young ath- execution and portfolio-com- letes.” As part of their pany management. It’s instilled EGON DURBAN, 34, based in London, is in charge of heading Silver Lake’s European investments. Durban, a Silver Lake approach, the founding part- in the firm’s DNA, as opposed founding principal, helped lead the firm’s $11.3 billion buyout of ners made a conscious decision to other firms, where there’s a SunGard Data Systems. He started his career as a technology to have no middle layer between risk of becoming pigeon- banker at Morgan Stanley. them and the junior employees, holed.” Even so, each of the choosing instead to occupy four has developed his own GREG MONDRE, 33, is the youngest of Silver Lake’s New Four that function themselves until niche based on his particular Amigos. But the partner, who led the $8.2 billion buyout of net- their staffers matured. interests and expertise. Mon- working-equipment maker Avaya and the $5 billion deal for dre, for example, handles many travel-systems operator Sabre Holdings, has been at the firm of the telecom investments, since its inception eight years ago. Mondre started his private- while Hao works on semicon- equity career at TPG after working as an investment banker at ductors and electronics assets, Goldman Sachs. The Wharton graduate currently serves on the boards of IPC Systems, Network General and Sabre Holdings. Durban focuses on European plays and Bingle assumes much KENNETH HAO, 39, is in charge of Silver Lake’s Asian opera- of the financial-services work. tions. The Harvard graduate joined the firm in 2000 from bou- “But we also make sure each tique Hambrecht & Quist, where he was a managing director. person has exposure to other Hao, whose first LBO was Seagate Technology, is a director of areas,” Hutchins says. “We Avago Technologies and Network General. PHOTOGRAPHS BY IAN SPANIER 259862.qxd:DM 9/10/07 11:33 AM Page 101

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That the New Four Amigos “We’re the call of first conduct better due diligence, was important that we worked have been able to ascend so choice by private-equity firms work better with our portfolio with individuals who had an quickly is due in part to their when tech assets come up for companies and truly under- in-depth understanding of our tech expertise, which helps sale,” Hao adds. The fund’s stand the businesses we’re business and the products UGS level the playing field for those flexibil ity allows the partners to investing in,” Bingle says. develops,” explains UGS chair- who don’t have decades of invest all over the capital struc- Such relationships win busi- man and CEO Tony Affuso. industry experience. “Tech is ture — from minority invest- ness, as evidenced by Silver These four are “extraordi- entrepreneurial by nature, ments to full-scale buyouts — Lake’s purchase of UGS, a nary both as stewards of our very meritocratic,” says Hao, and be nimble in any market. division of Electronic Data limited partners’ capital and noting that Silver Lake’s part- Finally, because of their Systems. Silver Lake estab- as representatives of our firm,” ners are typically viewed more unique on-the-ground train- lished a rapport with the Roux says. “They’re thought- design-software firm in 2000, ful, mature and often more when it first tried — unsuc- experienced than people who “OUR NOTION IS THAT WHEN cessfully — to bring about a are years older, because they’ve WE’RE OLD AND GRAY, THESE sale. When UGS was put on the had more time in the trenches.” FOUR WILL RUN THE JOINT.” block three years later, Silver While the founders have no Lake, which teamed with War- plans to go anywhere anytime burg Pincus and Bain Capital, soon, they’re clearly grooming as technology investors than ing, the New Four Amigos submitted an offer that was the quartet for bigger things. buyout pros. This tech savvy have credibility with their neck-and-neck (a difference of Adds Roux: “When we hired gives the firm an enormous portfolio companies’ manage- only $10 million) with a com- these four, our hope was that competitive ad vantage in auc- ment teams and other corpo- peting bid from a group led they would have the skills to tions — it was, after all, found- rate executives. “The theme of by KKR, TPG and Golden be great investors and the man- ed on proprietary deal flow operational experience was Gate Capital. Reportedly, UGS agement talent to help lead the from networking and referrals instilled in our culture — the management broke the tie by firm. And my expectation is in the highly specialized tech- need to be closer to each begging its parent to sell UGS that when we’re old and gray, nology industry. underlying business so we can to the Silver Lake–led team. “It they’ll run the joint.” D