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Investors using less debt to for software buyouts amid market tumult

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In the midst of a crisis in the banking sector, investors pulled off a string of high-profile deals worth a combined $18.5 billion to take publicly traded software names private.

The series of buyouts underscore the growing importance of the two key trends in the current dealmaking landscape: a decrease in the use of debt for financing and the growing importance of the take-private strategy in a time of sharply higher interest rates.

Specialist SaaS PE investors and more generalist GPs like Blackstone have built up a rising tide of software take-private deals in the first quarter of 2022. Software-take private deals have made up more than one-third of all public-to-private buyouts so far in 2023, PitchBook reported earlier this month

 

A trio of deals announced last week that used lower-than-usual amounts of leverage illustrates the trend. As Reuters has reported, the buyout firms financed these big take-privates with a debt ratio of only 9-50%, below the typical range of 60-80%.

SAP agreed on March 12 to sell its majority stake in analytics company Qualtrics to Silver Lake and the Canada Pension Plan Investment Board for about $12.4 billion. The firms’ offer was announced in early March.

The Qualtrics deal came together with a tiny debt ratio. Silver Lake said it obtained a $1 billion credit facility and a $1.75 billion equity commitment from CCP Investments to fund the acquisition, with the rest of the capital drawn from its LPs.

On March 13, Symphony Technology Group announced a plan to buy out Momentive Global, which runs SurveyMonkey, for roughly $1.5 billion. The investor received a $450 million debt commitment from Silver Point and plans to fund the remaining $1.17 billion through equity, per a filing with the Securities and Exchange Commission.

One day after the Momentive deal, Blackstone agreed to buy event-planning platform Cvent from Vista Equity Partners and other shareholders in a $4.6 billion take-private deal.

In addition to its own equity contribution, Blackstone secured a $1 billion loan to acquire Cvent and looped in the Abu Dhabi Investment Authority as a minority investor to help cover the rest, the firm said. Current majority owner Vista Equity Partners is also staying on in some capacity.

Cvent would mark Blackstone’s biggest software acquisition since buying out Quality Technology Services in August 2021, according to PitchBook data.

It’s part of Blackstone’s late-winter software buyout tear. Cvent is one of three software companies that Blackstone has purchased or said it plans to buy out so far in 2023, already matching the total number of software buyouts the firm announced last year.

In February, Blackstone’s advertising automation specialist Simpli.fi agreed to acquire Bidtellect, a demand-side advertising platform. Last week, Blackstone-owned music-rights organization SESAC acquired AudioSalad, a metadata and digital media platform for the music industry.

Financial terms of those deals were withheld. Blackstone didn’t respond to a request for comment.

Featured image by Matej Kastelic/Shutterstock

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