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?


Source: https://davidcummings.org/2017/05/30/another-publicly-traded-saas-company-going-private/

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