The tech landscape has been littered with flights to publicly traded safety as investors have sought safe haven in large cap names, marquee names and perhaps even dividends. The draining of interest and funds away from smaller players has been advantageous to funds (if not individual investors) looking to make the leap into beat-up names with perceived upside.
One glaring example came this week, when Vista Equity Partners, a private equity firm that makes its bones in software and information technology, pounced on Marketo, a publicly listed software company that plies its trade in marketing, spending $1.8 billion in a bid that takes out a company that has been public for nigh on three years. The 64 percent premium does indeed belie the mindset that there is hidden value in the stock. The deal adds to Vista Equity’s recent acquisitions that include Cvent, and a deal last year for Solera at $5.7 billion. Those are among the bigger deals in the industry, as Bloomberg has noted.
The $35 and change represents a big boost above the $13 a share Marketo fetched upon going public three years ago, yet it’s been a bit of a round trip that has seen shares halved from north of $40 and the mid-teens level was the recent nadir.
Marketo has said that it is the “clear leader in marketing automation” and has been delivering its products to more than 4,600 customers.
Forbes has noted that the company differs from peers in that it has a strong net cash position, with a top line that continues to grow at north of 30 percent and with losses that have been tied more to stock based compensation rather than “true day-to-day operations.” That may have led, in part, to the sanguine outlook of Vista Equity.
Could this be the first shot across the bow for mid-cap buyouts? Maybe, if they are in the right spaces. After all, these are not oil drillers or energy firms leveraged to the spot prices of commodities. Rather, they are tied to services in demand, like analytics.