SDC Capital, which focuses on digital infrastructure investments, has run a process to extend its hold over its portfolio company SummitIG, sources told Buyouts.
The deal is part of a wave of GP-led continuation fund deals that are keeping the secondaries market busy this year. Inventory on the GP-led side of the business is high, though the completion rate for such deals hovers around 50 percent, sources have told Buyouts. Deals that find their way to completion are generally those involving strong-performing assets run by quality franchises, according to sources.
GPs use continuation fund deals to extend their holds over assets for which they see more growth ahead and at the same time deliver proceeds back to limited partners in older funds. This method of liquidity has become more popular in the slow exit environment.
SDC, formed in 2017, has closed or is nearing completion of the single-asset deal for SummitIG, sources said. The total deal is in the range of $600 million to $700 million, one of the sources said, which includes capital to move the asset out of the older fund, as well as a reserve of capital for future growth, one of the sources said.
Recent fund performance
- SDC Digital Opportunities Fund II (2020 vintage): Net IRR 34.84%; Net TVPI 1.76x
- SDC Digital Opportunities Fund III (2022 vintage): Net IRR -14.75% Net TVPI 0.95x
Source: Buyouts’ data as of Dec. 31, 2023, citing information from Texas Municipal Retirement System. Subscribers can view here.
Lazard worked as adviser on the process. No one from SDC responded to a comment request Monday, while a Lazard spokesperson declined to comment.
SDC acquired a majority stake in SummitIG in 2019, likely through its second fund. The company runs fiber-optic networks for carriers, data center operators, content providers and large businesses in northern and central Virginia.
SDC Capital has grown quickly since inception. The firm was formed by Todd Aaron, managing partner, who previously co-founded Sentinel Data Centers in 2001 and worked as co-CEO. The other managing partner is Doug Kaden, who joined after co-founding Varagon Capital Partners, which sold in 2019, according to Kaden’s biography. Aaron and Kaden are principal owners of the management company, according to SDC’s Form ADV.
SDC focuses investments on data centers, network/fiber, wireless infrastructure and management IT/cloud services, according to its website.
The firm closed its debut fund on $400 million in 2018, beating its $300 million target, according to a statement at the time. It closed Fund II on $750 million in 2020 and Fund III on $1.5 billion in 2022.
The firm is in the market this year with its fourth fund, according to an SEC filing. It’s not clear how much the firm is targeting for Fund IV. The firm managed about $4.5 billion as of December 31, the Form ADV said.
So far this year, secondary deal volume is estimated around $27 billion to $32 billion, according to PJT Park Hill’s quarter volume update. PJT Park Hill estimates around $200 billion of live and upcoming secondary supply.
