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?