Vista Equity mulls $10 bln deals

Vista Equity Partners is mulling potential acquisitions at or above $10 billion, with valuations below peak levels in the tech sector despite lofty prices, said the firm’s Chief Executive Officer Robert Smith.

Vista Equity has been getting a look at software deals in the $10 billion-plus range now being shopped in the M&A market, but Smith didn’t mention any specific company names during his keynote appearance at The Wall Street Journal Private Equity Analyst Conference.

Some of those large tech deals may be consummated over the next 12 to 24 months, but not necessarily by Vista Equity, he said. He didn’t elaborate on whether Vista Equity would team up with other players if it embarked on such a large deal.

All told, Vista Equity manages about $14 billion, according to its website. In one large transaction, it closed a $4.3 billion take-private deal for Tibco Software in December. Its most recent flagship fund, Vista Equity Partners Fund V, wrapped up in October with $5.8 billion in commitments as its largest buyout pool to date.

“Today we’re witnessing the greatest era of innovation in our lifetime,” Smith said during his appearance with Dave Tabors of Battery Ventures in front of an audience of about 100 buyout pros at the JW Marriott Essex House on June 2.

He singled out ride-sharing service Uber as a company that Vista Equity admires – not as a prospective acquisition but as an example of ingenuity in the tech space.

The buyout shop has been sifting for deal opportunities in the payment transfer business aimed at emerging markets; also the use of software to help manufacturing and industrial firms improve efficiency and save money.

Smith said the current surge in technology deals comes at a time when software continues to provide ways for companies to cut costs and increase productivity, especially in the manufacturing sector.

Smith sees “a lot more opportunity” for deals even with software valuations rising more than 10 percent in the past year and big-buck transactions by strategic players such as Intel Corp’s plan to pay $16.7 billion in cash for chip-maker Altera.

Vista Equity attempts to “look underneath valuations” to find aspects of a company that may deliver additional growth and then pay a fair price for the target, he said.
“I’m not sure you’re seeing the top of the market,” Smith said.

The technology sector has much more balance sheet strength and maturity in terms of supporting infrastructure such as broadband and cloud services than it did back in 2000, when the tech bubble burst. The software sector also weathered the 2008 financial crisis better than many other industries because of its ability to help companies save money during the recession, he said.

Photo courtesy of Luisa Beltran