Silver Lake sees growth opportunity from IDC
* Says financial crisis created demand for IDC's products
* Sees chance to expand customer base
By Megan Davies
NEW YORK, May 4 (Reuters) - Private equity firm Silver Lake [SILAK.UL] is betting that financial data provider Interactive Data Corp IDC.N can grow demand for its products as customers increasingly focus on transparency after the financial crisis.
Silver Lake and private equity firm Warburg Pincus [WP.UL] earlier on Tuesday struck a $3.4 billion deal to buy IDC, majority owned by Pearson (PSON.L). For more details [nLDE6430HC].
It is the biggest leveraged buyout so far this year and further evidence that the number of deals being done is increasing, although the truly 'mega' deals of $10 billion and beyond are yet to return. For more details [nN30219741]
IDC provides reference data, markets pricing and trading infrastructure services to customers, including mutual funds, asset managers and banks.
Silver Lake said demand for IDC's products was being boosted by a focus on transparency and said its products could be expanded into new customer groups, such as hedge funds, that can use the data to help value their portfolios.
"It is remarkable that this business, that primarily serves the financial services industry, was able to grow through the middle of the crisis," said Mike Bingle, a Silver Lake managing director and co-head of Silver Lake in North America.
IDC's latest earnings report, released in Feburary, said that for the year ended Dec. 31, revenue grew to $757.2 million from $750.5 million the previous year, while income from operations slipped to $207.7 million from $209.7 million.
Silver Lake, a private equity firm focused on technology, said it was attracted by IDC's cashflow, diversification and good margins, which also meant the deal could get financed.
"In the early stages of recovery, the (financing) markets open for the highest quality companies that have really strong credit profiles," said Bingle.
Silver Lake, which has invested in firms including Ameritrade, Instinet and SunGard Data Systems, has been active in searching for deals over the past year. In September, it led an investor group that bought a majority stake in online phone unit Skype for $1.9 billion.
"Whereas after 2001, technology was blamed for the crisis, technology in 2010 is viewed as the solution. People realize they can't financially engineer their way to economic growth," said Joe Osnoss, a managing director at Silver Lake. "They have to get productivity gains in terms of better products."
Silver Lake is currently investing a $9.3 billion fund it raised at the end of 2007, according to data from London-based research firm Preqin.
It is the world's 33rd largest private equity firm when measured by the amount of capital raised over the past five years, according to a recent analysis by Private Equity International magazine.
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