Blackstone and Vista Equity Partners will acquire Smartsheet in an $8.4 billion deal. The all-cash bid of $56.50 per share represents a 41% premium to the company’s unaffected average share price. Smartsheet, a collaboration software maker that went public in 2018, announced the acquisition on Tuesday.
The company’s CEO, Mark Mader, said in a release, “As we look to the future, we are confident that Blackstone and Vista’s expertise and resources will help us ensure Smartsheet remains a great place to work where our employees thrive.”
The company’s shares rose 6% on the news. The transaction includes a 45-day go-shop period, allowing Smartsheet to solicit other bidders. Barring another offer, the deal is expected to close by January 2025, pending shareholder approval.
Qatalyst advised Smartsheet on the sale while Goldman Sachs and Morgan Stanley advised the private equity bidders. Smartsheet has been compared to other enterprise software companies, including Atlassian, due to its public debut in 2018 alongside companies like DocuSign. New York hedge fund Eminence Capital, founded and managed by Ricky Sandler, is poised to be the big winner among active investors in this deal.
The firm, which manages $7.2 billion in assets and specializes in bottom-up value investing, held 4.3 million Smartsheet shares as of its latest filing for the second quarter. Eminence began purchasing Smartsheet shares in the second half of 2022, acquiring 2.4 million shares at around $34 each and subsequently growing its position to 4.3 million shares, with an average purchase price of about $36 per share.
Blackstone and Vista’s strategic acquisition
With Smartsheet now being acquired at $56.50, Eminence Capital stands to make approximately $90 million, a 60% gain in just two years. Market analysts suggest that other technology giants—such as Amazon, Google, Zoom, and Oracle—as well as other private equity firms, could have been potential buyers. However, a larger offer is unlikely to materialize.
They also noted that this deal might signal further software buyouts in the sector due to pent-up demand, particularly in the private equity universe, following a slowdown in M&A activity over the past few years due to higher interest rates. Smartsheet, headquartered in Bellevue, Wash., reported a revenue increase of 17% to $276.4 million in its most recent quarter, with an operating loss of $8.5 million—an improvement from a loss of $36.1 million during the same period the previous year. Despite the revenue growth, analysts have noted that Smartsheet’s stock price has been stagnant for the past two years.
Founded in 2005, Smartsheet has grown to employ over 3,300 people. The company’s trajectory hasn’t always been straightforward. Matt McIlwain, managing director at Madrona Venture Group and an early investor in Smartsheet, recounted the company’s near-collapse in 2008 and its subsequent struggles before achieving substantial growth.
Smartsheet did not hire its first sales representative until 2011, and it took until 2012 to reach $10 million in revenue. Today, the company boasts over $1 billion in revenue, generates substantial free cash flow, and leads the market in enterprise collaborative work management. This acquisition reflects a broader trend in the tech industry, where firms with specialized products and steady cash flow are becoming attractive targets for private equity firms seeking profitable investments.
