He said that over the past 18 months, Silver Lake and the other investors had made achievements such as acquiring the Skype intellectual property, resolving litigation with the company’s founders, recruiting a new management team, and signing up strategic partnerships with companies such as Verizon, Citrix, Samsung, Panasonic, Sony and LG.
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That is far higher than a typical private equity return.ĮBay, which owns a minority stake in Skype, said that it made a total return of $1,4-billion on its original investment.ĭurban said that Skype fit at the “intersection of three very powerful macro trends” - social, video and mobile communications. The internal rate of return for the Skype deal - a key measure for private equity investors - was 70% to 80%, the first source who spoke to Reuters said. Such returns can reap substantial rewards for private equity executives running the funds - which typically take 20% of the profit. Private equity firms can make high returns on investments if timed and executed right. But I also believe Microsoft has a real shot at making this business worth three to four times more than even they’ve paid for it.” “We made the biggest investment in our firm’s history and had the courage to invest. “It took a lot of conviction to invest in the summer of 2009,” said Egon Durban, managing director of Silver Lake. EBay retained about a third of the company.
The Silver Lake-led investor group bought a majority stake in Skype from eBay in 2009 - during the credit crisis - for $1,9-billion in cash and a $125-million note. Microsoft said it decided to appeal directly to Skype’s ownership base with Silver Lake taking the lead. It decided against hiring investment bankers to help them with the deal.
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