Smartsheet, an enterprise software company based in Bellevue, Washington, went public in 2018 but is now going private again after announcing an $8.4 billion buyout deal with Blackstone and Vista Equity Partners. The deal represents a premium of about 41% to the volume-weighted average closing price of Smartsheet stock for the 90 trading days ending July 17. The acquisition will make Smartsheet a private company once more, six years after its initial public offering. The company is allowed to explore other potential acquirers until November 8, but analysts believe the existing offer is likely to go through.
The potential buyers for Smartsheet include tech giants such as Amazon, Google, Zoom, and Oracle, as well as other private equity firms. However, analysts believe that a larger offer is unlikely to emerge beyond the Blackstone and Vista Equity Partners deal. The acquisition of Smartsheet could serve as a bellwether for other software buyouts, as M&A activity has slowed in recent years due to higher interest rates. There is pent-up demand and supply, particularly in the private equity universe, which could lead to more acquisitions in the software industry.
Blackstone, one of the buyers of Smartsheet, recently acquired Seattle-based pet-sitting company Rover in a $2.3 billion deal. Smartsheet reported a 17% increase in revenue to $276.4 million in its most recent quarter, with an operating loss of $8.5 million. The company’s revenue growth has slowed over the past four years, and its stock price has remained stagnant. Smartsheet is closely identified with a single product, and its growth has begun to plateau, which could be a significant factor in the decision to go private.
Smartsheet offers cloud-based enterprise work management technologies for managing projects, collaborating, storing data, and automating tasks. The company serves 85% of the Fortune 500 as customers and competes with other companies such as Airtable, Asana, Atlassian, and Wrike. The capabilities of Google, Microsoft, and Adobe products also pose competition to Smartsheet. Founded in 2005, Smartsheet has grown to over 3,300 employees and has established itself as a market leader in enterprise work management.
The journey of Smartsheet has not been without challenges, as the company nearly ran out of cash in 2008 and did not hire a sales representative until 2011. Early customers paid an average of $500 per year for a subscription, and the company did not reach $10 million in revenue until 2012. However, Smartsheet has since grown to over $1 billion in revenue, generates substantial free cash flow, and has become a market leader in collaborative work management. The decision to go private again could provide the company with more flexibility and resources to continue its growth and innovation in the competitive software market.
