A record of successful exits has underlined the success of Investcorpâs unique investment strategy in the technology area. The Firm has returned to its investors in the Gulf US$ 53.1 million to date in net proceeds from the realizations of its Technology Ventures Fund I, which was launched in the last quarter of 2001. Its most recent technology exits were Willtek, a German-based leading developer of test equipment for the wireless communications industry, and Spectel, the worldâs largest independent provider of teleconferencing equipment to corporations and teleconferencing service providers, based in Ireland.
Head of Investcorpâs technology investment business Savio Tung, who recently toured the Gulf region to market Investcorpâs second technology fund, explained that the strategy over the past three years had been to undertake venture buyouts of small spin-offs and subsidiaries of major telecom and technology conglomerates, as well as to make selective investments in young technology startups. "This focused investment strategy has allowed us to generate highly attractive returns for our Fund investors that position us in the top 10% of comparable technology funds," he said.
"We fund business growth in later stage IT companies in North America and Western Europe. These are usually private businesses that are active in one of four areas: wireless data, software, infrastructure or digital content. They must demonstrate strong prospects for sustainable competitive advantage and long-term profitability by having solid business fundamentals, experienced and motivated management teams and products and services that are innovative and leading edge. Adding value is achieved through the active contribution of our technology investment team, typically through board representation."
By the end of 2004, Investcorp expects to have returned approximately $75 million in net proceeds returned to investors, representing 36 percent of committed and 51 percent of invested capital in Technology Ventures Fund I. The Firm is currently taking subscriptions for Technology Ventures Fund II.
Gary Long, Chief Operating Officer of Investcorp commented: "Our offer for our second technology ventures fund will close at the end of this month, after which the team will begin its investments in new technology firms in the US and Europe, selected to continue delivering the returns benchmarked by the achievements established by the first fund".
The Wiltek story
In April 2003, Investcorp backed a $9.5 million management buyout of Willtek from its US parent company, Acterna Inc, at an attractive valuation at a time when market sentiment on wireless telecoms was poor. Investcorp worked actively to help Willtek expand operations in the US and Asia, as well as to help to fund new product launches, and Willtek became one of only a few companies able to provide a full range of test solutions for 3G protocols. Within 18 months there was a more positive market outlook, driven in large part by the rapid deployments of 2.5G and 3G wireless networks globally, and Investcorp received an offer to acquire Willtek at approximately three-times its initial invested capital. In October 2004, the company announced a definitive agreement with the AMEX-listed company, Wireless Telecom Group, to acquire all of the outstanding stock of Willtek for a total consideration of approximately $32.0 million. Investcorp has retained a major shareholding in the new group as a result of shares received as part of the transaction.
The Spectel story
Spectelâs leadership in audio conferencing solutions has helped its more than 500 customers around the world reduce the need for business travel by facilitating âremote communicationâ between employees located in different offices. However, by early 2002, Spectel had suspended its plans for an IPO on the Dublin Stock Exchange due to the general weakness in the technology stock markets. As a result, an opportunity emerged for Investcorp to invest in this highly promising later-stage technology company. In August 2002, Investcorp became the largest institutional investor in Spectel, investing $9.8 million in the company. Investcorp worked to assist Spectel in expanding its North American growth initiatives as well as launching its next generation Internet Protocol (IP)-based conferencing platforms. As a result, Spectel was acquired, in October 2004, by Avaya Inc, for over $100 million.