Massive take-privates have been propping up private equity activity in enterprise software.
While global PE deal value in the business-centered software arena is down from its 2022 peak of $138.8 billion, investors are remaining active with $58.3 billion in total value in 2023, spearheaded largely by a number of large-scale take-privates, according to PitchBook data.
In the largest enterprise software PE deal of 2023, Silver Lake and the Canada Pension Plan Investment Board bought customer experience management company Qualtrics off of the Nasdaq for $12.5 billion.
The second- and third-largest deals in the sector were also take-privates. In March, Blackstone acquired software company Cvent for $4.6 billion, and most recently, Vista Equity Partners agreed to purchase EngageSmart for $4 billion on Oct. 23.
In enterprise software, portfolio company profitability is often rooted in the recurring contract model. At the CAIS Alternative Investment Summit conference in Los Angeles, Rod Aliabadi, managing director at Vista, said during an Oct. 17 panel that its enterprise software portfolio companies generate the vast majority of their revenue through recurring contractual agreements
He said these contracts are long-lasting, typically three or more years, and guarantee a steady stream of revenue for portfolio companies in the near future.
From an economic standpoint, that means you get “phenomenal investable assets in these software companies,” said Aliabadi.
Vista is the most-active PE investor in enterprise software, with 146 deals over the past decade, followed by Thoma Bravo with 119 deals, according to PitchBook data.
Here’s the 10 largest PE deals in software enterprise in 2023, with take-privates holding the top spots.
Featured image by Andriy Onufriyenko/Getty Images
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