PE Targets Software Industry: Blackstone and Vista Acquire Smartsheet for $8.4B

Private equity (PE) giant Blackstone's latest deal reveals that the software industry is becoming a favored target for PE firms.

On Tuesday, September 24th, Eastern Time, the enterprise work management software platform Smartsheet announced that it had reached an agreement with Blackstone and another PE firm, Vista Equity Partners, to be acquired in an all-cash deal valued at approximately $8.4 billion.

Subject to regulatory and shareholder approval, Blackstone and Vista will acquire all outstanding shares of Smartsheet at a price of $56.50 per share.

This acquisition price represents a premium of about 41% compared to the volume-weighted average closing price of Smartsheet's stock over the last 90 trading days ending July 17th.

According to the agreement, Smartsheet will have a 45-day "go-shop" period to solicit other acquisition offers.

At the same time, Smartsheet's board of directors will retain the right to terminate the deal with Vista and Blackstone to accept a better proposal, "subject to the terms and conditions of the merger agreement."

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Following the announcement of being acquired by Blackstone and Vista, Smartsheet's stock price surged on Thursday, opening up about 6%, and generally maintaining a gain of over 6% throughout the trading session, hitting a new high for the day with a gain of over 6.6% in the early morning, potentially setting a new high for closing price in over two years.

The $8.4 billion acquisition by Blackstone and Vista is among the largest privatization deals of the year and is seen as a new sign of PE firms seeking targets in the software industry.

Data from LSEG shows that the largest privatization deal this year was Silver Lake's $13 billion acquisition of sports and entertainment marketing group Endeavor Group.

Some comments suggest that high interest rates have made leveraged buyout (LBO) financing more difficult, so most of last year, acquisition companies did not make moves, but this year they have actively targeted industries such as technology and services.

There are also comments that PE has been looking for companies that often have reliable cash flows and can expand their scale through acquisitions.

In addition to the acquisition of Smartsheet, another recent example is that in July, Bain Capital and Reverence Capital Partners agreed to privatize financial technology company Envestnet Inc. for $4.5 billion.

Founded in 2005, Smartsheet offers a range of software tools for enterprise customers to allocate work tasks, track project progress, and share files through a spreadsheet UI.

By 2010, Smartsheet had more than one million users from 20,000 organizations, and it integrated with Microsoft's Office 365 and the Azure cloud, and launched an iOS app.

Unlike Asana and Monday.com, which are targeted at small companies, Smartsheet focuses on serving complex large enterprises.

Its official website shows that more than 80% of the Fortune 500 companies are using the company's work management platform.

News of PE's interest in acquiring Smartsheet has been circulating for several months.

In July this year, the media reported that Smartsheet attracted acquisition interest from some PE firms, and the recent acquisition news has been even more rampant.

Last month, the media reported that Blackstone and Vista were discussing the acquisition of Smartsheet, and this Monday there were also reports that the two sides were in deep negotiations, with the transaction value approaching $8 billion.

Smartsheet's CEO, Mark Mader, stated in the announcement regarding the acquisition agreement that the company is experiencing the next stage of growth, and the deal with Blackstone and Vista proves that the company's employees have performed well in serving customers and partners, as well as in building a market-leading enterprise platform.

Looking forward, he believes that the expertise and resources of Blackstone and Vista will help the company ensure that Smartsheet remains an excellent workplace, allowing employees to thrive, while driving innovation and providing greater value to customers and stakeholders.