Why Did Vista, Blackstone Up the Price on Smartsheet to $8B?

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Insights

Chart of the Week: Interest rates are often thought to significantly impact private equity buyouts, but statistical analysis suggests a weak correlation between interest rates and buyout activity in the US. Research from Value Add finds a Pearson correlation of 0.20 between buyout activity and the Fed Funds rate, indicating that lower rates might actually reduce buyout activity, as other factors such as economic growth, valuations, and access to capital also play a role in private market activity. (Read More)

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Spotlight

Work smarter. What was a $7 billion ticket price a little over a week ago has now jumped to $8 billion – Vista and Blackstone must really want Smartsheet, a cloud-based coworking software for spreadsheets. The two will reportedly pay about $56 a share. Share prices shot up 16% from July 18th's price, when the sale process was announced, from $45.35. Vista already has a 4.7% stake in the company. 

The price of the asset wasn’t always agreed upon. When the sale process was announced, Reuters reported the firm was valued at $6.6 billion. 

$3.2 billion of the deal’s financing will come in the form of private debt. Direct lenders will provide a $2.9 billion recurring revenue loan and a $300 million revolving credit facility, priced 6.25 to 6.5 percentage points over SOFR. Additionally, the loans would stipulate that once Smartsheet starts churning a profit, the interest rate would change to 5.75 percentage points over SOFR. 

The deal is expected to close in the coming weeks.

And harder. Profit is the sore spot for Smartsheet, as it has yet to turn one. However, things are looking up for the company – its earnings per share forecast states that in the next 12 months, the firm will increase its earnings per share by $0.03, up from September 5th's decrease of $0.21.

This quarter, however, Smartsheet managed to deliver $0.06 in earnings per share increases – likely a key reason behind the price increase from $6.6 billion to $7 billion to $8 billion. 

And it also helps that the company’s revenue growth rate is beating out its competitors, according to Benzinga, measuring 19.6% as of April 30. And given the company’s subscription-based model, this revenue is relatively stable and predictable. 

With this tailwind, there are two other operational paths Vista and Blackstone can take:

1. Cost management: Benzinga also shows that Smartsheet’s net margins are below industry averages, at -3.37%. Effective cost management could strengthen profitability.
2. Scale: Benzinga also notes that Smartsheet’s market capitalization is “a reduced size compared to peers,” which could be caused by “growth expectations or operational capacity.” MarketBeat thinks Smartsheet can grow into small- and medium-sized businesses that will be looking to cut costs and streamline operations with new technology as the economy contracts.

Blackstone and Vista did not respond to requests for comment.

Buyout News 

And now, a look at last week’s deals and deals-to-be…

… or not to be. Looks like CVC’s bid for Deutsche Bahn’s logistics unit DB Schenker went off the rails. Last week, CVC’s whopping €16 billion bid was beaten out by DSV’s €14.3 billion offer. DSV did not have union backing like CVC – so Axios warns that CVC may “continue pressing its case” to DB’s supervisory board and the German government. 

Speaking of workers’ claims, Carlyle-owned Sedgwick – a business claims management solutions provider – has received a capital injection of $1 billion from Atlas Partners, bumping its valuation up to $13.2 billion, just short of double the $6.7 billion valuation it garnered when Carlyle initially invested in 2018. Carlyle and Store Point Capital will remain on as investors.

Meanwhile, in the software space, Vista is additionally teaming up with Warburg Pincus to buy Redwood Software, a task automation software company. While financial terms of the deal were not disclosed, Turn/River Capital sought a $2.5 billion valuation when it launched the sale process earlier this year. 

Vista wasn’t the only software specialist having a busy week – Insight Partners was also all over the market, but on the sell-side.

Insight Partners has reportedly enlisted Evercore to bring its developer applications software platform, Tricentis, to market. Insight is seeking a deal to value the asset at $4 billion and is also considering retaining a minority stake in the company. It first acquired a stake in the company in 2017, when it led a $165 million financing round.

Insight Partners has also solidified the sale of its cyber security asset, Recorded Future, to Mastercard for $2.7 billion. The acquisition is expected to close in Q1 2025. Mastercard plans to use the software to help prevent identity theft and fraud. 

And finally, Permira has finally wrapped up its Squarespace deal, ultimately taking the company private for $7.2 billion – up from the agreed-upon price of just under $7 billion set in May. 

Not a soft week in software. 

Questions? Email us: editor@valueaddpe.com