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Vector Capital Inks $450M Deal to Restructure PE Funds

Tech-focused private equity firm Vector Capital has inked a roughly $450 million agreement to restructure two of its investment funds with affiliates of Goldman Sachs, as well as Singapore’s sovereign wealth fund GIC, according to a Tuesday statement.

The funds are Vector Capital II LP, which closed in 1999, and Vector Capital III LP, which closed in 2005. Under the terms of the agreement, affiliated vehicles owned by existing limited partners in Vector Capital II and Vector Capital III are also being restructured.

Goldman Sachs Asset Management’s Vintage Funds and GIC led the transaction, and collectively, are now the largest investors in the funds.

Alex Slusky, founder and chief investment officer of Vector Capital, said in a statement that the firm is “pleased to be partnering with Goldman Sachs and GIC, who recognize the significant long-term value in Corel and WatchGuard, which comprise the vast majority of the remaining assets in Funds II and III.”

“Importantly, this transaction will provide these two companies and their management teams with the additional runway and committed capital to pursue strategic M&A opportunities and execute on their growth strategies,” Slusky said. “Moreover, this is a terrific outcome for our Fund II and III LPs, who are receiving a premium value that is meaningfully above the assets’ original cost basis.”

Corel Corp. is a Canadian software company and the creator of WordPerfect, a word processing software that allows users to preview a formatting or graphic change in real time. For instance, users can hover their cursor over a list of fonts and see how the changed font looks in a document before actually committing to the font change.

WatchGuard Technologies Inc., meanwhile, is based in Seattle. The company provides small and medium-sized businesses with network security solutions.

“We are excited to lead, along with our partner GIC, a transaction that meets the needs of investors seeking liquidity from Vector’s older funds while also restructuring the terms of the funds to allow Vector and their portfolio companies to pursue a value enhancing strategy on behalf of both new and continuing investors,” said Harold Hope, co-head of Goldman Sachs Asset Management’s Vintage Funds. “We have been impressed with Vector’s investment approach and look forward to continuing our partnership with them.”

Choo Yong Cheen, chief investment officer of private equity at GIC, echoed Hope’s sentiments in a statement.

“We look forward to continuing the growth at Corel and WatchGuard, and to helping Vector maximize value at both companies,” Cheen said.

Headquartered in San Francisco, Vector Capital touts a specialization in “transformation investments in established technology businesses.” The firm boasts $3.5 billion of capital under management, with other portfolio companies including WinZip and domain registration provider

Evercore served as financial adviser and Kirkland & Ellis LLP served as legal counsel to Vector Capital.

The Kirkland team was led by partner Michael Belsley and included partners Jeffrey B. Golden, P.C., Sarah Kirson, P.C. and Matthew Dickman.