Over the past couple of years following the financial crisis, private equity firms steered clear from any megadeals in the tech space as regulations and valuations soared. But as the markets have shifted and interest rates remain low, private equity funds have viewed tech buyouts, especially in the corporate-software and data space, to be stable business that will remain on their feet even if the US economy enters a recession. This is potentially good news for fintech startups focused on enterprise SaaS products, as these PE firms could be part of a new exit strategy.
Some private-equity firms remain wary of tech, citing the high prices paid in some recent deals and the perils of rapidly changing tech trends. Vista, for example, paid 7.5 times Marketo’s sales and eight times Cvent’s, more than double the average price-to-sales ratio of 2.9 for private-equity tech buyouts since 2000, according to Dealogic. But the buyers are betting that the private-equity model of rigorous cost management and disciplined strategic behavior will increase the value of their acquisitions, fueling profits down the line.