Earlier today Vista Equity Partners announced they were acquiring Xactly Corp (NYSE:XTLY) and taking it private for $564 million. Vista has already bought several public SaaS companies including Marketo for $1.8 billion and Cvent for $1.65 billion, among other acquisitions. Public markets are supposed to price in all known information, yet Benjamin Graham’s famous quote still rings true today:
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
The idea is that opinions on public companies fluctuate, along with their corresponding stock price, on a regular basis. Only, over an extended period of time, their value is based on the underlying substance.
Let’s look at info on Xactly Corp from Google Finance:
- Xactly Corporation is a provider of cloud-based incentive compensation solutions for employee and sales performance management.
- 450 employees
- Current annualized run rate $97.2 million
- Annualized year-over-year growth rate of ~20% (hence slightly less than a 6x exit valuation on run rate not including cash on hand and debt)
For more information on Xactly, read the notes from the S-1 IPO filing.
For Vista Equity Partners, they must believe they can generate annualized double-digit returns on the investment. Here are a few ideas how they might do it:
- Substantially Increase the growth rate through new strategies or direction
- Roll up a number of smaller SaaS companies in the sales performance market grow much faster through an in-organic approach
- Do nothing and believe that the momentum and potential for SaaS over the next 10 years is greater than what the public markets believe
My guess is that it’s a general bet on SaaS and better long term potential than markets price in. I’m interested to see how it plays out over the next 5-7 years.
What else? What are some more thoughts on another publicly-traded SaaS company going private?
One thought on “Another Publicly-Traded SaaS Company Going Private”
I’d guess the general markets aren’t factoring in the value of software, AI, automation etc. out to 20 or so years when it begins to make (more of) a measurable impact in the job market (than just a lot of speculation). I would also imagine most folks wouldn’t bet on technology which would replace their ability to earn the very money they are investing, so there would be an inefficiency…