Vista's Next Buyout May Be Hiding in Plain Sight
Vista Equity Partners's next deal may already have the firm's fingerprints all over it.
The private equity firm on Monday agreed to buy Infoblox, a U.S. network and cyber-security software company, for $1.6 billion. It's Vista's third planned buyout of a public company in 2016, making it second only to Apollo Global Management in striking such deals this year. 1
More deals are inevitable for Vista -- and perhaps even imminent, in part because it has so much cash on hand. On top of a $5.78 billion fifth fund that closed just two years ago, the firm in March raised more than $5.7 billion out of a total $12.5 billion that it's seeking for two new funds, according to Bloomberg News.
As far as its latest target is concerned, Vista has a history with Infoblox: it already owns a 4.8 percent stake. And according to filings as of June 30, Infoblox was Vista's largest position by market value. Digging back further, it appears Vista began buying Infoblox shares in the quarter that began July 1, 2014, when they traded at a volume-average weighted price of $13.36, according to Bloomberg. That's nearly half Vista's offer price of $26.50, but it slims down the equity check that the firm ultimately has to write as part of the deal. The stake may have provided the firm with better access to Infoblox's management, which in turn could have played a part in its conviction and valuation of the company.
It's worth pointing out that Vista's second-biggest holding at June 30 was Marketo, which it took private for $1.6 billion in a deal that closed last month. Vista started buying Marketo shares in the third quarter of 2014, too, when they traded at a volume-average weighted price of $29.10, according to data compiled by Bloomberg. That's roughly 20 percent lower than the ultimate $35.25 price Vista paid for Marketo, but again, having the stake makes a buyout a little easier to navigate.
That's not to say Vista will snap up any of the remaining companies in which it is a shareholder. After all, it has an arm that uses research to identify what it describes as long-term investments in the global technology, media and telecommunications sectors.
But even if it's not the ultimate buyer, others may take a look at what Vista deems as undervalued and run the numbers themselves. Filings show Vista has owned at least 10 other targets, including Demandware, Press Ganey, Outerwall, Ruckus Wireless, Digital River, SciQuest, Rally Software, Aruba Networks, inContact and even LinkedIn before they were eventually acquired by other private equity or strategic buyers.
The firm's presence may entice activists to target companies in which it's a shareholder. That may have been the case with Infoblox, which attracted Starboard Value. The Jeff Smith-led fund can lock in a paper profit of at least $50 million or an annualized return of roughly 100 percent if it holds onto its stake until the Infoblox deal closes.
That's a win through and through for Starboard, helped in part by Vista's willingness to stretch on valuation. The Infoblox deal represents a multiple of 3.5 times the company's 12-month trailing revenue, which is above the median 2.6 multiple paid in comparable deals, but still below the lofty 7-handle that Vista is set to pay for Cvent.
Interestingly, Vista's third-largest holding at June 30 was PTC, a company that my colleague Shira Ovide and I highlighted last week as a potential target for Vista's key rival Thoma Bravo, the firm that made an opening bid for Infoblox. As competition between the duo heats up, don't be surprised to see some familiar names at the heart of their next tug-of-war.
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