London-headquartered buyout fund Apax Partners is about to close its debut technology-focused fund on $1bn (£768m).
The former Tommy Hilfiger owner is nearing a formal close but is waiting to finalise the last few commitments, City A.M. understands.
Apax Digital will focus on making investments in high-growth technology companies which might fall outside the remit of its flagship fund. It follows the lead of firms such as The Carlyle Group, which has had a tech-focused arm for more than 10 years, CVC and KKR.
“If you're a bigger private equity firm, it's increasingly difficult for you to deploy capital into these exciting but smaller digital businesses that are all below the equity threshold of your main fund,” said Andy Lund of placement agent Beartooth Advisors.
Apax's last flagship fund, its ninth, closed at the end of last year having gathered $9bn of commitments. In order to spend this capital, it will be focusing on larger deals – ruling out several tech companies.
Another reason for raising a dedicated fund is the huge demand for private equity. Institutional investors are clamouring to place their money with the best firms, according to Andrew Sealey of advisory firm Campbell Lutyens, and a firm with a strong track record can take advantage of this.
Sealey added that many of the best technology companies are choosing to remain unlisted for longer, and private equity offers one route for investors to back these companies early.
Although private equity has been historically wary of tech, after fingers were burned when the dot-com bubble burst in the late 90s, Lund thinks firms are flocking back to the sector as it becomes increasingly clear that the internet and its surrounding technology is ingrained in the modern way of life.
These days we rely on the internet,” he said. “There's no doubt that the internet is the key channel.”