Elevating business for Bono

Bono doesn't fit the typical profile of a managing director of a private equity firm. His high-profile campaign to drop Third World debt, his Chairman Mao chic and his rock star persona might even lead the casual observer to think Paul "Bono" Hewson would eschew capitalism.

But while they are not afraid to speak up about injustice, Bono and his fellow band members have proven to be shrewd businessmen. In the latest Sunday Times Rich List, U2 and manager Paul McGuinness, who receives an equal share of all earnings, were estimated to be worth a cool £469 million (€692 million).

Back in 2003 Bono decided he would like to do something more with his millions. He rang famed Silicon Valley investor and part-time rock singer Roger McNamee with an idea. He wanted to invest in media companies that could benefit from his experience and dollars.

Less than a year later, Elevation Partners, the only private equity firm named after a U2 song, was born. The firm has $1.9 billion in funds committed from wealthy individuals, pension funds and other sources to invest in "market-leading media, entertainment and consumer-related businesses".

According to its own documents, Elevation seeks to make investments of $50-$300 million and it only invests in a select few companies so that it can provide "substantial support to each management team".

This week Elevation made its biggest punt to date by taking a 25 per cent stake in Palm for $325 million (€240 million).

In the days before the Blackberry, no self-respecting tech executive would be seen without one of Palm's sleek digital personal organisers; in the late 1990s Al Gore was even a user.

Palm, formerly PalmPilot, was seen as an innovator and its personal digital assistants (PDAs) were widely regarded as the best on the market and the easiest to use. However, as mobile phones began to add the functionality that once was the sole preserve of PDAs, Palm struggled to keep up. Its smartphones have never managed to capture the imagination or market share that previous iconic products did.

There had been much speculation that a big mobile player like Nokia or Motorola would come in for Palm and give its technology a shot in the arm. Observers have said that the company really needs a strategic partner which could improve distribution and product development.

What Palm will get from the deal is a number of Elevation executives on its board - but it will also add an additional $400 million in debt.

Bono's partners in Elevation are some of Silicon Valley's shrewdest investors. McNamee founded Silver Lake Partners, the first really successful private equity firm to focus on the technology sector, in 1999.

One of Silver Lake's most successful buyouts was hard-drive maker Seagate, which has a significant operation just outside Derry and formerly had a significant business in Clonmle, Co Tipperary. It acquired the company for $2.2 billion in 2000 as part of a consortium of investment firms. When they took it public again just over two years later, it was valued at $5.1 billion.

Another co-founders of Elevation is also a Silver Lake veteran, Mark Bodnick. Along with Bono and McNamee, he is credited with being instrumental in drawing up the investment plan for Elevation.

It is easy to imagine that Bono and Bodnick may have had some discussions about one of Bodnick's first jobs as a director of the crisis management group at Kroll Associates. According to the Elevation website, that role involved providing advice to clients about corporate security, kidnaps and ransoms, and political violence.

Former Apple chief financial officer Fred Anderson is also a co- founder and managing director. Anderson is widely regarded as one of the key executives responsible for the iPod-inspired turnaround at that company which coincided with his tenure from 1996 to 2004.

The final managing director and co-founder is Bret Pearlman, a veteran of private equity outfit the Blackstone Group.

For the Palm investment, Elevation has called upon the services of Jon Rubinstein, the Apple executive who oversaw the design of the iPod and the iBook. Rubinstein will become Palm's executive chairman, while Anderson and McNamee will also take board seats.

McNamee, whose band the Flying Other Brothers includes a former member of Jefferson Starship, and his fellow investors are the kind of financial advisers you expect to mingle with when you achieve the wealth and status that Bono enjoys.

The singer's involvement with Elevation has seen him hook up with some unlikely bedfellows, though. Last August the firm invested a reported $250-$300 million for a 40 per cent stake in in the family-held Forbes media company, publisher of the Forbes business magazine. Forbes is headed by Steve Forbes, a political conservative who has twice sought the Republican Party US presidential nomination on a flat-tax platform.

Coming at the same time that it was revealed that U2 had moved one of its main companies to Amsterdam in a tax-reduction move, media commentators queued up to brand the Dublin band "sell-outs".

Elevation's first investment, back in 2005, brought together video game producers Pandemic Studios and Bioware in a $300 million deal. It was a more low-key entree than the firm had planned.

Elevation's original target was Eidos, creator of the Tomb Raider series of games and their curvy heroine Lara Croft, but the £71 million bid was unsuccessful.

Elevation, and Bono in particular, then caught a lot of flak because Pandemic had made its reputation on Full Spectrum Warrior, the commercial version of a US military training tool, and was developing Mercenaries II: World in Flames. The other deal in which the firm has been involved saw it put $100 million into Move, formerly Homestore, a US property website. That also was not without controversy because the same month the deal was announced, Move's former chief executive was charged with financial irregularities and received a 15-year prison sentence.

Bono is currently at the G8 summit in Germany with Bob Geldof, where the musicians are attempting to put pressure on leaders to deliver on aid pledges they made to Africa two years ago.

An Elevation representative says management "is consumed at the moment and is travelling around talking to shareholders of Palm", so executives were unavailable for interview.

Given those kind of schedules, one would have to wonder how much day-to-day involvement Bono has in Elevation. His partners stress his support for every deal they have announced, particularly the Forbes deal, but it wouldn't be unkind to wonder do they protest too much.