This Company Is Trying to Raise the World’s Largest Private Equity Fund
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- Dan Primack
October 15, 2016, 4:02 PM EDT
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It will have nine digits.
The largest private equity fund ever raised was by The Blackstone Group in 2006, with $21.7 billion in capital commitments. Until last night, when SoftBank announced that it is in the process of raising a $100 billion fund focused on the global technology sector.
I know that Term Sheet is known to occasionally have typo troubles, but this isn’t one of those times. $100 billion. As you might imagine, we’ve got a bunch of notes on this:
Details: This is not yet a done deal, but rather a memorandum of understanding between SoftBank and the Public Investment Fund of the Kingdom of Saudi Arabia (PIF). Under terms of the MOU, SoftBank will commit up to $25 billion over five years, while PIF will contribute $45 billion over the same time period. SoftBank also is in talks with other third-party investors for the remaining $30 billion slug. It will be called the SoftBank Vision Fund, and based in London (a curious choice, given how some other PE firms have moved European staff out of the UK after the Brexit vote).
Team: SoftBank Vision Fund will be led by Rajeev Misra, SoftBank’s head of strategic finance. Two sources say that Misra was the driving force behind this fund, which was entirely conceived and executed after the exit of former SoftBank president (and de facto investment boss) Nikesh Arora back in June. Other staffers include new hires Nizar Al-Bassam (ex-Deutsche Bank) and Dalinc Ariburnu (Goldman Sachs), plus existing team members like Alex Clavel (ex-Morgan Stanley) and Ervin Tu (Goldman Sachs). Not participating is Ming Ma, who just left SoftBank to join ride-hailing company Grab (a SoftBank portfolio company) as president.
Structure: My understanding is that SoftBank Vision Fund has a “very traditional” private equity structure, which I take to mean something like 2 and 20. If you strip out the GP commitment, that would initially mean a whopping $1.5 billion in annual fees ($900m from PIF alone).
Strategy: SoftBank isn’t saying too much about targets, although it sounds like this will be a combination of growth equity and buyout deals (the latter possibly with leverage, thus increasing its buying power even further). I wonder if Twitter could end up in its crosshairs, although that may be viewed as too much of a turnaround vs. growth play. The bigger question, however, is if SoftBank is trying to corner this market at the exact wrong time from a valuation perspective ― and if its entry will only further drive up tech prices in the short term.