Vista Equity Partners has agreed to buy EngageSmart, a customer engagement software and payment solutions company, in one of this year’s few take-privates valued above the $1 billion mark.
The firm announced the all-cash take-private transaction on Monday, valuing EngageSmart at about $4 billion and marking Vista’s fourth take-private since October 2022, when it completed an $8.4 billion acquisition of tax automation provider Avalara. This year the $101 billion software and tech investor also completed the $2.6 billion acquisition of Duck Creek Technologies and the $4.6 billion purchase of KnowBe4.
The size of the EngageSmart deal is a relative rarity in the back half of 2023. While take-private deal value started off strong in Q1 with record-breaking deals like the Canada Pension Plan Investment Board and Silver Lake‘s $12.5 billion acquisition of software company Qualtrics International, the median size of all US PE take-privates fell to an abnormally low $520 million in Q2 2023, according to PitchBook’s Q3 2023 US PE Breakdown.
In Q3, take-privates continued to get smaller: Of the 17 US PE deals announced, 65.4% involved sub-$1 billion companies.
Still, while the average take-private valuation is shrinking, overall deal activity using the transaction type is on par with pre-2021 levels.
The take-private also places EngageSmart in the camp of recent boomerang stocks, or companies that went public between 2020 and 2022 only to go private again a few years later. Boomerangs dominated take-privates at the sub-$1 billion mark in Q1 2023, and while only four of the sub-$1 billion take-privates in Q3 2023 could be categorized as boomerangs, PitchBook analysts expect more of these deals in the near future.
Growth equity investor General Atlantic and Summit Partners, a fixed income investment firm, bought EngageSmart in 2019 through an LBO financed with $173.9 million of debt. In August 2021, EngageSmart filed for an IPO and went public in September of that year.
Through Monday’s deal, Vista will hold approximately 65% ownership and General Atlantic, an existing stockholder, will retain a minority stake—around 35% of the outstanding equity.
General Atlantic retaining its stake in EngageSmart is further evidence of this year’s sustained US PE exit freeze. From Q2 to Q3, total US PE exit value fell 40.7%, the lowest figure—other than Q2 2020—since 2008, according to PitchBook data.
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