Smartsheet is being bought and taken private for $8,400,000,000 in cash.

Just under 8X ARR.

This was about a 40% premium to the average market cap throughout 2024. 

The buyers

The same company that bought Marketo for $1.75B in 2016 and sold it just two years later for $4.75B

Not a bad return…

Vista Equity Partners is the private equity firm behind this deal. 

To buy Smartsheet they’ve teamed up with Blackstone.

But it’ll likely be Vista leading the charge post acquisition. 

They are well known for their formulaic, almost factory-like approach to improving SaaS businesses.  

Vista was founded in the year 2000. 

By Robert F. Smith. A Goldman Sachs alumni and chemical engineer by training. 

Vista takes a very engineering driven approach to running software co’s.

A big part of this is their Value Creation Team.

The group inside the organisation that implements more 100 best practice plays into the companies they acquire. 

And they’re pretty good at it. 

According to Perplexity they generate annual returns in the high 20% range.

They’ve completed more than 600 transactions.

You’ll recognize some of them if you’re in the GTM space. Companies like Drift, Pipedrive and Salesloft.

The background 

Smartsheet plays in a very crowded market.

They’ve got large public competitors like Asana and Monday. 

And a laundry list of private co’s competing for the same spend (think Notion, Clickup, Basecamp etc)

But Vista was probably turned on by the success Smartsheet has had in the enterprise space. 

They boast more than 90% of the Fortune 100 as customers.

They grew ARR 19% YoY in Q2

Had CAC Payback of 34 months

NRR of 113%

And free cash flow of $57M

It’s this $230M per year in free cash flow that makes a deal like this easier to complete.

Smartsheet will likely be loaded up with debt in order to finance the transaction. 

(They have no debt on the balance sheet currently).

The outlook

The stiffest competition for Smartsheet over the next few years will be Monday.com.

Monday is growing like a runaway train. 

They’re at $1B in ARR vs Smartsheet’s $1.05B

Mid 30% ARR growth for the last 4 quarters. 

It took them only 9 quarters to go from $500M to 1B in ARR. 

CAC payback of 22 months 

And most importantly in the battle with Smartsheet, they’re growing their $100K+ ARR customer segment by 50% per year at the moment.

This will be fun to watch over the next few quarters. It’s just a shame we won’t have visibility into Smartsheet’s metrics. 

Will we see more of these deals?

We may see more of these kinds of deals. 

SaaS companies are trading at much lower multiples than they have in recent history. 

In fact they’re at the lowest point they have been since 2016.

These lower multiples make them easier to buy.

Add to that we’ve got a macro environment where interest rates are likely heading down. 

And you’ve had a ton of under performance - or at least slowing growth across a large % of the public SaaS companies. 

Potential targets

I’ve got a few companies in mind that could be take private candidates.

If we run on the assumption that PE firms are looking for the following characteristics (similar to Smartsheet).

• Enterprise SaaS

• Strong FCF

• Low valuation (relative to historical levels)

• Slowish / slowing growth 

This presents them with an opportunity to fund the acquisition (through cash flow) and make operational improvements that increase the value of the business (rather than just applying financial engineering).

DocuSign

There was talk earlier this year that DocuSign was being shopped. 

Bain Capital and Hellman & Friedman were competing over the deal.

Reports have since come out that the parties couldn’t agree on a purchase price. 

The share price is up about 10% YTD but they’re still trading at a fairly low multiple. 

Market cap is $12.8B or about 4.4X ARR

They had 27% free cash flow margins in Q2 giving them a free cash flow run rate of about $800M per year. 

NRR is only 99%. Not good. 

And the growth rate is just 7%.

DocuSign to me looks like a turnaround story waiting to happen.

Some product innovation, some improvements to GTM efficiency and a lot of value could be unlocked.

Box

Box to me is another candidate. 

One caveat here – They are still founder led and I haven’t checked if the CEO has control of the voting shares.

That being said, let's not let technicality get in the way of some fun. 

Box is at $1.08B in ARR

Growing at 3% currently.

102% NRR

Which means they’re generating very little in the way of net new business.

GTM efficiency is terrible - CAC payback is over 150 months and Magic number is around 0.1.

They’ve got strong free cash flow - $250M over the last 12 months. Or 25% FCF margins.

They’re only trading at 4.6X ARR.

An acquirer could come in here.

Pay $6B for them (a 50% premium).

If they could restore growth rates to mid teens, they might be able to generate a 10X ARR multiple. 

As a comparable - Mongodb is trading at 10X ARR with 13% growth and negative FCF margins. 

UiPath

UiPath could also make sense. 

UiPath is perfectly positioned to develop AI agentic solutions.

They already deliver automation solutions to clients in the form of RPA.

They might be better positioned than any other company to understand the current workflow issues and typical problem sets faced by enterprises everywhere. 

They could develop AI Agents that could solve these in a smarter way.

They’re at $1.55B in ARR.

Growing at 19%.

Trading at 4.4X ARR.

They’ve generated $325M in free cash flow over the last 12 months. A 21% FCF margin.

NRR is 115% - good!

GTM efficiency is average - magic number 0.32 but most of this comes from expansion (see NRR above)

The play here is to reaccelerate net new logo acquisition through the development of AI agents - solving the next set of problems that customers face that RPA can’t address currently. 

Conclusion 

This could be the beginning of a take private boom for PE.

Reply to the email and let me know which companies you think are PE take private targets. 

Any obvious ones I missed - Anything I got wrong?

Let me know.