IPOs cause a number of confusion. Takeovers by private equity firms, not a lot.
After all, most founders don’t start out with the vision of selling their startup to a leveraged institutional buyer who will need to take it back to a different startup at a profit in a number of years. It probably lacks the narrative appeal of, say, a sale to a tech giant or a giant public debut.
However, especially for software firms, acquisitions by private equity firms are statistically probably the most common kinds of exits. Over the last five years, PE buyers have been essentially the most energetic jointly published greater than $36 billion to purchase dozens of personal space firms, based on Crunchbase.
As shown within the chart below, M&A activity for personal firms peaked in 2020 and 2021 and has declined significantly in recent quarters.
An analogous trend is clear after we have a look at PE purchases of each private and non-private software firms:
Active buyers
We can point to several aspects over the previous few years which have likely contributed to the slowdown in PE deals. First, global software investment and mergers and acquisitions have declined overall. Valuations are also in constant flux, with successful startups adapting to public market downturns.
Moreover, with the advantage of hindsight, PE firms, like most acquirers, likely overpaid on many boom-time deals. This should make them more wary of big-ticket purchases in the long run. Higher rates of interest and a cold IPO climate pose further hurdles.
Still, we shouldn’t let a number of slow quarters distract us from the larger picture. This is because there continues to be a handful of personal equity firms which have a big stake in the biggest software exits.
Eight firms particularly stand out, listed below.
The biggest startup offers
Many of the costlier deals involve venture-backed firms. The largest within the last 4 years include:
- CRM software provider Pipedrive sold the bulk stake Vista Capital Partners in 2020 in A agreement which reportedly valued the corporate at $1.5 billion. Previously, New York-based Pipedrive raised greater than $90 million in high-profile enterprise financing.
- Software and technology private equity firm Tomasz Bravo it reportedly paid $2.85 billion in 2020 purchase majority interest Wire, an Illinois-based IT management software provider. The company previously held a majority stake in Flexera before selling it several years ago.
- PE investor Hellman and Friedman acquired a majority stake in an Atlanta-based application security provider Checkmarx in 2020 at Valued at $1.15 billion.
- Vista Capital Partners acquired majority share in a customer support software provider Sight in 2020 in a deal that valued the corporate at $1.1 billion. Previously, San Francisco-based Gainsight raised greater than $150 million in enterprise funding.
It’s price noting that almost all of the larger deals took place no less than a number of years ago. This just isn’t surprising because PE deal volumes and costs are inclined to increase when exit opportunities are plentiful and financing terms are relatively low-cost. Recently, in fact, these conditions haven’t been applied.