Private Equity and the Post-IPO Life of Enterprise Tech Companies Part I
In the middle of the frenzy of tech IPOs, some of the biggest names in the tech industry continue being acquired by private equity( PE) firms. Last week, Jive Software, one of the former leaders in the enterprise collaboration space, was acquired by PE firm ESW Capital for $462 million. Jive is expected to go private as part of the transaction.
ESW is planning to add Jive to its family of sales and marketing companies called Aurea. ESW has steadily put together an impressive portfolio of companies in the sales and marketing area and has grown a reputation among PE firms as an specialists in the space. The acquisition ends a troubling run for Jive in public markets.
PE Firms to the Rescue
Jive’s acquisition is another example of a high profile enterprise tech company getting acquired by PE firms after a disappointing performance in the stock market. To some extend, PE firms have become the “life after the IPO” option for many enterprise tech companies.
In recent years, the number of high profile PE acquisition of publicly traded enterprise tech companies seems to have skyrocketed. Vista Equity partners is one of the most active PE firms in enterprise tech. Last year, Vista took marketing automation leader Marketo private for $1.79 billion. Visa also acquired IPO candidate Ping Identity for $600 million. Thomas Bravo, another PE firm, acquired data visualization vendor Qlik for $3 billion while Apollo Global tool Rackspace private for $4.3 billion. Tibco and Informatica are also household enterprise tech names to be taken private via PE vehicles.
Dell is a company that seems to have mastered the PE game. After going private, Dell received a massive cash infusion from PE powerhouse Silverlake Partners in order to acquired EMC in a super complicated transaction. More recently, Dell sold its Spanning cloud backup unit to PE-VC firm Insight Venture Partners. As you can see, PE firms have been willing to spend big sums to become a viable channel for troubled enterprise tech stocks.
Why is this Happening?
There is a common denominator in all the examples used in the previous section. All those companies have been incredibly successful in their respective enterprise tech markets but have struggled as public stocks and eventually lost market share to newer competitors.
Rackspace was a leader in the infrastructure as a service(IaaS) space but never developed effective platform as a service(PaaS) capabilities and struggled to keep market share against faster PaaS competitors such as Amazon, Microsoft, IBM or Google. Marketo is an incredibly success story but the stock recently stumbled un comparison with new offerings from Adobe and pressure from startups in the space. Qlik ie one of the pioneers of the self-service data visualization tools market but the stock regularly underperform competitors like Tableau and was under pressure as incumbents such as Microsoft or Google entered the space with very innovative solutions. Tibco is a long-time leader in the enterprise integration market but the stock has regularly disappointed and the company has lost market share to younger competitors such as MuleSoft and Talend. Jive itself was one of the pioneers of the enterprise collaboration market but the focus on that space seems to have shifted to new companies such as Slack, Atlassian, Microsoft or Facebook.
How to look at this phenomenon from the perspective of a public market investor? That will be the subject of a future post…