ClearBridge Investments Sends Letter Urging Board of Directors of Model N, Inc. to Reconsider Proposed Acquisition by Vista Equity Partners
Summary
Originally, we were attracted to Model N’s unique competitive positioning, dominating a niche, high-value market selling to a resilient customer base in life sciences and high tech. With increasing regulatory burden, we anticipated there would be expansion module opportunities over time, a fact echoed by numerous management statements on the company’s cross-sell potential. We appreciate that the Board of Directors is balancing the risk of execution as a stand-alone entity, which is inherently uncertain and can be impacted by external factors beyond management’s control, with the certainty of a private equity cash offer. With that said, looking at a variety of private equity deals in software over the last two years, to account for the latest valuation regime, the proposed acquisition carries one of the lowest take-out multiples, and is far below the averages we see of 7-9x NTM EV/Sales. Owned by Franklin Templeton, ClearBridge operates with investment independence from headquarters in New York and offices in Baltimore, Fort Lauderdale, London, San Mateo, and Sydney.