David Roux, co-founder and chairman of private equity firm Silver Lake, just finished up his morning keynote at the SuperReturn U.S. conference in Boston. Kind of an odd talk, in that he spoke a lot about portfolio management from the perspective of limited partners rather than from the perspective of general partners. Maybe he was just looking to get in good with prospective investors.
No “news” made, but two quotes of note. The first was about Silver Lake’s history with Skype, which it carved out of eBay in late 2009 and recently agreed to sell to Microsoft MSFT for $8.5 billion:
“We bought the business at an EBITDA multiple of around 15x, and financed it with $2.4 billion of equity and $750 million of debt. Then, over the course of the next 18 months, we did a lot of work to improve the business. We changed out the top 15 managers, settled outstanding litigation, doubled the number of engineers, quadrupled the number of new products in market and halved the product development cycle time. And then we exited at a multiple more than double where we bought it.”
Second, I asked Roux if he felt the tech market was closer to 1997 or 1999 in terms of valuations. He didn’t answer directly, but did say:
“As has been said, no one rings a bell at the top. But I think we’re closer to the top than the bottom… There obviously is a big difference, though, in that a lot of today’s companies are growing rapidly with real revenue and business plans. Most of the failure of the ’99 crop was that those companies didn’t have good business models. It’s kind of like the mortgage market, which at its core was a financial proposition that was untrue. A lot of these companies today are great companies, but some might be ahead of themselves in terms of value. We’d like to get ahead of value, and then benefit from the growth.”