By Chibuike Oguh

(Reuters) – Silver Lake, a private equity company, has spent decades cultivating and supporting CEOs who love big deals. It is a strategy which pays handsomely when acquisitions such the Broadcom deal (NASDAQ:) Inc with cloud computing firm VMware (NYSE:) Inc) happen.

Broadcom announced earlier Thursday that it would acquire VMware for $61 Billion, making this the largest acquisition worldwide so far in 2011.

According to sources familiar with the matter, Silver Lake was heavily involved in negotiations for the merger of the companies. Because it holds a 10% share in VMware, the company is eligible for a payment. Silver Lake spokeswoman declined to comment.

Silver Lake’s purchase of VMware was the outcome of a business relationship that began ten years ago with Dell Technologies Inc Chief Executive Michael Dell. Silver Lake’s co-chief executive Egon Daura managed the relationship.

Hock Tan is the Broadcom chief executive. The history of this buyout firm goes back further. Silver Lake formed part of a private-equity consortium that helped create Broadcom’s predecessor Avago. In 2005, Agilent Technologies Inc. (NYSE:) acquired the semiconductor business of Agilent Technologies Inc. for $2.66 Billion. Silver Lake chairman Ken Hao recruited Tan to lead the company the next year.

These chief executives were supported by Silver Lake in their corporate acquisitions. This strategy has allowed Silver Lake to diversify its investing, which is focused on growth and leveraged buyouts. It has also helped it differentiate itself from its competitors.

Mehdi Khodadad co-heads Sidley Austin LLP’s Private Equity practice. She said the playbook could help Silver Lake extract more value through dealmaking.

Khodadad stated that private equity firms could lend their expertise to execute a synergy strategy and dispose of non-core assets in the combined pro forma business.

Silver Lake contributed $1.4 billion equity in order to assist Michael Dell in taking his computer manufacturer private.

Silver Lake took part in an equity financing of $4.25B for Dell’s $67B acquisition EMC Corp (NYSE) three years later. The deal allowed Dell to take over EMC’s 8.1% stake in VMware. To help finance the deal, Dell issued “tracking stocks” that are tied to VMware shares.

In 2018, Dell was made a public company by purchasing back its tracking stock and exchanging them for its shares.

Silver Lake was granted a 10% interest in VMware last year when Dell restructured its controlling interests to be available for its shareholders. Michael Dell was awarded a 40% share in VMware. Silver Lake, which holds a 12.8% share of Dell’s stock, continues to be the second largest shareholder.

Silver Lake was similar to Hock Tan in its journey. Silver Lake had a stake at Avago, when the stock traded in 2009. In 2015, Silver Lake helped finance the $37B acquisition of Broadcom. Broadcom’s name was also changed by Avago.

Broadcom made a $117billion takeover offer for Qualcomm (NASDAQ:) Inc. Silver Lake provided $5billion in financing. The U.S. government stopped the takeover because it was concerned that Broadcom (which was at the time located in Singapore) would be dominant in the U.S.’s semiconductor market.

Strong FUND RETURNS

These investments have not yielded any profits for Silver Lake. The net IRR of some recent Silver Lake funds (the $15 billion Silver Lake Partners IV) and Silver Lake Partners IV (the $10.3 billion Silver Lake Partners IV), as reported by the California Public Employees Retirement System (CalPERS) data in September 2013, respectively, is 37% and 36.7%. Private equity funds aim to achieve a net IRR below 20%.

Silver Lake has investments including vacation rental business Airbnb Inc, self driving startup Waymo, and online lender SoFi Technologies Inc. A major deal also pending that it assisted in putting together due to its connection with an executive dealmaker, Elon Musk’s $44 Billion acquisition of Twitter Inc (NYSE:).

Silver Lake offered to fund Musk’s proposed $72 billion offer in 2018 for Tesla to be taken private (NASDAQ.) Inc. Musk declined to accept that offer. However, he then turned to Durban who was on the board of directors at Twitter when he made his decision to buy the social media company.

Durban was a liaison between Musk’s board and Twitter’s last month, according to a Twitter regulatory filing. Silver Lake made $1 billion of convertible debt financing in 2020 and Durban became Twitter’s director.