Deal Maker of the Year Awards 2012 WINNER - USA
DEAL: Vista Equity Partners Closes VEP Fund IV at $3.5 Billion
NAME: Robert F. Smith COMPANY: Vista Equity Partners POSITION: Chairman and CEO WEBSITE:
www.vistaequitypartners.com
Vista Equity Partners (“Vista”) was founded in 2000 to pursue buyout transactions of companies in the enterprise software and technology- enabled solutions (collectively “enterprise software”) industries. Over the last twelve years, Vista has successfully demonstrated its ability to create value through a disciplined investment focus and a dedication to systematic operational transformations of its portfolio companies. Vista’s equity investment strategy is to acquire companies that meet this profile and then apply its proprietary set of operational best practices to rapidly and aggressively implement change, create value and generate positive returns for its investors.
FIRM PROFILE: DEAL OVERVIEW: Q
You raised VEPFIV in what most consider a particularly difficult fundraising
environment, and had an extremely successful result. To what do you attribute your success?
Founded in 2000, Vista manages approximately $6.6 billion in investor commitments across four buyout funds including its initial vintage 2000 single investor fund. In 2007, the Vista team raised Vista Equity Partners Fund III (“VEPFIII”), its first institutional fund, which was recently recognized as the best performing vintage 2007 buyout fund by Thompson Reuters’ Buyouts magazine. Recognizing the importance of emerging and small-market software companies, Vista raised Vista Foundation Fund I (“VFFI”) in 2009. Most recently, in 2011-2012 Vista raised Vista Equity Partners Fund IV (“VEPFIV”), which is its middle market targeted fund following on VEPFIII. Across its funds and portfolio Vista has effected over 75 transactions representing over $19 billion in transaction value.
To date, the Vista team’s financial and operational background combined with the depth of its experience has enabled Vista to generate a Gross IRR of approximately 46.7% on realized investments, representing a 4.1x gross cash-on- cash multiple on the capital invested in those re- alized investments. In addition, Vista has not lost money on any control transaction – all have either been realized at a gain or are currently valued at or above cost.
The majority of our VEPFIII investors made commitments to VEPFIV, and on average they increased their commitments by significant multiples. In addition, we had a number of new investors, who had either been referred to us by our existing investors or that had sought us out based on our performance, that reached out to us ahead of the VEPFIV fundraising process. Overall, with an initial target of $2.5 billion for VEPFIV, the demand from our existing and new investors exceeded our capacity and we closed the fund at its limited partner commitment hard cap of $3.3 billion.
Vista has over its history focused on building and scaling its ability to identify value creation opportunities within target companies and establishing the processes and resources to capture that value. Vista’s consistently high returns on its investments, its demonstrable improvements to its portfolio companies’ operating results, the depth and stability of its team of investment professionals, and its commitment to transparency with its investors have all worked to elevate Vista in its investors’ portfolios. This, along with the ability to communicate a clear and cohesive strategy for continued value creation, has enabled Vista to exceed its VEPFIV fundraising goals despite the otherwise difficult fundraising environment.
Q
You indicated above that Vista saw an opportunity in the small and emerging
market to implement the Vista strategy. Would you expand on that and your plans in this area?
Vista is known in the investment community for its focus on software companies, and as a result we see and review literally hundreds of deals each year. As the size of target companies
naturally grew in VEPFIII and VEPFIV we saw the need to provide a continued focus on smaller and middle sized companies. To focus this effort, we had two of our Principals develop a team within Vista to leverage the full Vista transaction and operations infrastructure and focus exclusively on these opportunities. VFFI is now nearly fully invested. As such, we expect that in the first half of 2013 the team will begin the process of discussing VFFII with investors, and we expect demand to be very similar to what we received in VEPFIV. We look forward to bringing this opportunity to our investors.
Q
You have had significant success in your software equity investing. What other
investment opportunities are you seeing in the space?
With our focus on software, we feel we can bring value to our investors in a number of ways in addition to our traditional equity investing. While we have as a firm helped to develop the software debt capabilities of a number of providers, there remains a dearth of providers to the space. We believe Vista is uniquely positioned to help fill this void and leverage our transactional and operational expertise to the software debt market. Given this, Vista has begun discussions with our existing investors about a debt fund focused on software companies. The early reaction to these conversations has been very positive, and we are excited about bringing this new opportunity to our investors.
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