Private Equity Feasts on Software Bargains

If there’s one group of deal makers that hasn’t been slowed by market volatility, it’s those private equity folks buying up much of the enterprise software industry. Thoma Bravo’s $10.7 billion deal on Sunday to buy Anaplan, a maker of business planning software, follows Vista Equity Partner’s $16.5 billion purchase of Citrix Systems in January. Private equity has been a big buyer of enterprise software for years, of course. But lately, as valuations across the once-hot enterprise software sector tumble hard, the math on acquisitions looks even better. 

Anaplan, for one, has been growing at roughly 30% annually for the past couple of years, which seems decent enough. But in November, after the firm projected revenue growth would slow to 25% this year, its stock dropped 21%. That took the stock to its lowest level, as a multiple of the coming year’s revenue, since the Covid 19–inspired market crash of March 2020, according to Koyfin data. If that seems like an overreaction, it is, although it’s lately been a common one for any company forecasting slower growth. Thoma Bravo, which last year bought software firms ranging from Medallia to Proofpoint, pounced.