KKR Grows its Tech Portfolio


February 28, 2017

Private equity firm KKR continues to grow its tech portfolio. The firm invested $50 million in Cherwell Software to help the software company compete with its rivals. It’s likely the IT company will use the investment in order to make an acquisition to expand its reach.


The software company has made its mark by offering codeless solutions to fix customer legacy technologies companies use. The $50 investment is expected to help the company expand its information technology service management product line and to possibly seek to acquire another technology company. Cherwell chairman Vance Brown didn’t provide any more detailed information on the potential targets.


In an e-mail to Denver Post, Brown commented the deal by stating, “This investment accelerates the strategy of taking market share from these ‘mega’ vendors which have saturated the IT service management market with expensive and inflexible tools, confusing licensing models, and punitive pricing.”


KKR director Vini Letteri will join the board as part of the deal. Letteri made a comment regarding the purchase and the future focus on the company by saying, “With IT teams’ increasing importance within organizations, ensuring there is no interruption to IT services and that customer satisfaction is high are paramount to any business”.


According to the local newspaper, the $50 investment is the largest venture capital investment in Colorado Springs in almost 17 years.


Hunting for deals


The New York-based private equity firm made the investment through its $711 million Next Generation Technology Growth Fund. It made its first investment in 2015 when the fund investment in GetYourGuide. The fund has made other deals this month. The firm acquired a majority stake in Optiv Security at the start of February.


In addition, the start of the week also saw the private equity firm’s Asian growth fund hunt for deals. The firm’s China Growth Fund made an investment in a pet food company, Gambol Pet Group. The size of the investment has not been disclosed.


Technology sector continues to attract private equity


Although KKR is not a purely tech-focused private equity firm, it has embraced the technology sector. It currently has sizable investments in companies like Magic Leap and Sonos, which is a speaker manufacturer. The firm has also made investments in security technologies.


The Wall Street Journal noted the growing thirst for the technology sector in its 2016 post, in which it noted the high proportion of tech companies in all US buyouts. Dealogic’s data at the time showed the early part of 2016 had witnessed the highest level of tech company sales in US buyouts since 1995. The newspaper wrote, “tech’s increasing popularity underscores a long-term shift for private equity firms, which typically buy underperforming companies, fix them up and sell them for a profit in five years or so”.


ValueWalk reported on a study on investor appetite at the end of 2016, which showcased private equity interest for tech. The technology sector was positioned high on the list when it came to targeted sectors for 2017. It’s likely that there will be plenty of more deals in the sector this year.

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