PE firms stick with enterprise software bets in tough exit market
Summary
Sales of PE-owned enterprise software companies got tangled up at the start of 2023, hitting the lowest deal level since Q2 2020.Between the decline in technology valuations, a dormant market for new listings and the scarcity of cheap deal financing, PE firms exited only 23 US-based enterprise software companies at a combined value of $4.2 billion in the first quarter. A frozen IPO market and the difficulty in securing financing for large transactions kept tech valuations at lower levels, prompting more sellers to hold on to assets longer, said Derek Hernandez, a senior emerging technology analyst at PitchBook. "We continue to be excited about the tailwinds of digitization across all verticals," said Rachel Arnold, who co-manages Vista Equity Partners Endeavor funds, which target lower-middle-market enterprise software companies with at least $10 million in revenue. And enterprise software and IT services stand to be the sectors experiencing the largest growth, according to a forecast from research firm International Data Corporation.Vista has overcome adverse market dynamics across the PE landscape. Notable among them is the acquisition of Zapproved , an legal software provider picked up by Leeds Equity Partners portfolio company Exterro Vista also sold its stake in Fusion Risk Management to Boston-based PE firm Great Hill Partners , and exited its investment in Tripleseat , which was acquired by General Atlantic Vista remains a minority shareholder in all the transactions, which Arnold said is to show its confidence in the future of these businesses by keeping some skin in the game.