Los Angeles-based private investment firm Gores Technology Group said Monday that it had secured $400 million for a new buyout fund despite a tough climate for capital raising.
Gores, founded in 1987 by tech and telecom entrepreneur Alec E. Gores, attracted investors against a backdrop that saw U.S. buyout funds raise a total of $820 million in the third quarter, a 10-year low, according to data tracker Thomson Financial.
"We came in during as tough a climate as you can find, but investors took notice of our strong track record and unique formula," Gores said, although he declined to discuss his investment returns.
The firm raised the financial commitments from institutional investors, such as state pension funds, for the Gores Capital Partners fund over a six-month period. Gores brought in outside investors for the first time in an effort to target bigger deals, he said.
Gores Technology has bought controlling stakes in more than 30 firms during its history, including software firm Learning Co. from Mattel Inc. and electronic payment systems developer VeriFone from Hewlett-Packard Co. in recent years.
The firm has sold its majority stakes in those companies but still has controlling interests in about 15 tech companies, including MPC, the personal computer business it bought from the former Micron Electronics in 2001.
Gores said his firm has been successful because its staff of 45 in the U.S. and Europe acts quickly on potential deals, with turnaround strategies already in place. For example, the firm reached an agreement to buy Learning Co. in October 2000 after seven days of negotiations, and the money-losing operation became profitable by March 2001, Gores said.
"We don't have to hire a bunch of consultants every time we want to do a deal," he said. "We like the tough deals, the things other people can't figure out."
The three-year bear market for stocks, which hit the tech sector especially hard, has made fundraising a challenge for private equity firms such as venture capital and buyout specialists, said Greg Soukup, a partner specializing in mergers at Ernst & Young in Los Angeles.
"They haven't had the great returns of the late 1990s, and they haven't had exit vehicles in the last couple of years," Soukup said.
What's more, many of them have had to focus on "working through problems" in the companies already in their portfolios.
Still, Soukup said, with mergers and acquisitions appearing to heat up recently, along with the market for initial public offerings of stock, conditions for private equity investing could be improving.