Francisco Partners inks first buyout acquisition

Menlo Park's Francisco Partners jumped the gun on the close of its $1 billion technology buyout fund, landing its first acquisition in XcelleNet, an Atlanta-based software company.

The new private equity firm founded by Texas-Pacific veteran Dave Stanton and Robertson Stephens Inc. founder Sandy Robertson committed $50 million to acquire the Managed Systems Division of Sterling Commerce. The company had operated independently under the XcelleNet name until it was purchased by Sterling in 1998, and will now return to that name.

XcelleNet established a strong market niche for itself designing software products to manage remote computer systems for the health care insurance, retail manufacturing and pharmaceuticals industries. But for the last year it has made a major push into the Internet and mobile device area, with systems for management of wireless notebook computers and handheld communications equipment.

"We look forward to supporting XcelIeNet as it furthers its leadership role in the mobile market," said Francisco partner Neil Garfinkel.

"The company's technology is uniquely positioned at the intersection of the rapidly growing market for mobile devices and the deployment of business applications over the Internet."

Francisco put down a $10 million note on the $50 million purchase price, and will sink an additional $15 million into XcelleNet to jump-start product development.

Francisco began raising a fund at the first of the year, targeting $1 billion for acquisition and growth capital investments in technology companies. The firm has not yet closed on the fund, but will finance the XcelleNet investment using Donaldson, Lufkin & Jenrette, which is handling placement for the fund.

Francisco has identified spinoffs of company divisions as a prime target of its investments. Partner Stanton engineered the largest such technology deal in history while at TexasPacific, when he bought the ON Semiconductor division of Motorola for $1.8 billion.

The technology buyout field has grown rapidly since it was essentially started by Stanton when he joined Texas-Pacific in 1994.

In addition to Texas-Pacific's own $2 billion in two new funds, new entries include Francisco, Silver Lake Partners, which has the support of the venture capital firm Kleiner Perkins Caufield & Byers and buyout specialist the Blackstone Group.

Thomas Weisel Partners also is raising a fund targeted at more than $1 billion that also will aim for tech deals, and Foster City-based Broadview Capital has a $250 million fund, which is backed by mergers adviser Broadview Associates.