Vista Equity Partners Emerges From Private-Equity Shadows
(Wall Street Journal) -- October 14, 2014 The firm behind one of the largest leveraged buyouts this year has little visibility outside the world of private equity.
But as Vista Equity Partners finalizes a new $5.8 billion investment fund and sets its sights on more high-profile acquisition targets in the technology industry, that may soon change.
Vista said the fund, its fifth, is its largest to date. The firm—which limits its investments to software, data and “technology-enabled” companies—originally targeted a $3.5 billion fund but ended up attracting much more.
The Austin, Texas, firm hopes to do more investments in the vein of its $4 billion leveraged buyout of Tibco Software Inc. TIBX +0.08% The deal, announced last month, is the largest LBO of a public company since a group of investors teamed up to buy BMC Software Inc. last year, according to data provider Dealogic.
This week, Vista announced two more deals: It is buying payments company TransFirst Inc. and Navex Global, a maker of compliance software, from other private-equity firms. The deals are worth a combined $2 billion, said a person familiar with the matter.
The new fund’s investors include public pension funds in New York, New Jersey, Illinois and Wisconsin. The firm also tapped a number of investors outside the U.S. “Enterprise software is a global business, so it’s important to have relationships not only where customers live but also where companies we want to buy are sprouting up and exist,” said Robert F. Smith, the firm’s co-founder and chief executive. He described the software sector as “recession-resistant.”
Vista, founded in 2000 by Mr. Smith and Brian Sheth, has quietly grown into one of the 10 best-performing private-equity firms in the world, according to research firm Preqin.
Messrs. Smith and Sheth met while working on Goldman Sachs Group Inc.’s West Coast technology investment-banking team. Mr. Sheth, who was 24 years old at the time, began at Vista as an associate reporting to both Mr. Smith and third co-founder Steven Davis, who left in 2009 and is now at Banneker Partners.
The firm says it has never lost money on a buyout, and it has delivered annualized returns of 28% to its fund investors since its inception, according to marketing documents for its new fund reviewed by The Wall Street Journal.
Vista has evaluated more than 3,200 deals over the past two years, its founders said. The firm has identified potential carve-outs from more than 2,000 U.S. companies, they said. Still, Mr. Smith acknowledges that Vista faces stiff competition on deals, despite its specialized focus.
“Today there are well-capitalized firms and pension funds putting capital into this space, which drives up prices and makes it crowded, so we need to continue to hone our skills and experience to find the companies we want,” he said.
Vista touts job growth at its portfolio companies, which, on average, increase their head count by about 21%, the firm said. In some cases, it has returned outsourced product development and customer-service jobs to the U.S.
“Despite its tremendous growth, Vista has never deviated from its core principals of how to run a world-class software company,” said John Borgerding, president and chief operating officer of Vista-backed Websense.
Vista has offices in San Francisco and Chicago, but Messrs. Sheth and Smith have made Austin their base. They liken themselves to Secretariat, the racehorse that won the 1973 Belmont Stakes by 31 lengths. The horse ran as fast as it could against itself, rather than against the competition.
“Moving to Austin helps us to continue to run our own race,” said Mr. Sheth. “It allows us to have our own perspective and be unaffected by what folks on the coasts are thinking, whether they’re optimistic or cynical about deals.”
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