Contact: Scott Denne
In another sign that the private-equity playbook is changing, financial sponsors are moving faster than before to add to their newest holdings. While PE firms typically have taken several quarters to allow a new asset to settle in before making bolt-on acquisitions, they’re abandoning that waiting period as they put a record amount of cash to work in the tech M&A market.
According to 451 Research’s M&A KnowledgeBase, of the 10 largest companies taken off a major US exchange by a PE firm in the last 12 months, three have already announced a bolt-on deal – all of which have come less than a month after the close of the buyer’s take-private. For comparison, among the 10 largest US take-privates in 2016, three also did a bolt-on, yet none within six months of the platform acquisition.
In the most recent example, Bazaarvoice picked up speech-recognition company AddStructure just three weeks after Marlin Equity closed its February take-private of Bazaarvoice. West Corp also waited less than a month after its take-private closed to make its first acquisition, and has announced two more since that November 2017 deal. Xactly didn’t wait a full two weeks before its first follow-on under Vista Equity’s ownership. Barracuda Networks hasn’t yet completed a deal under Thoma Bravo’s purview, which officially began two weeks ago, although it did get one done in the 10 weeks between the take-private announcement and the close.
The rush for bolt-on deals shows that competition for targets from PE firms is increasing on all fronts. As we noted in our 2018 Tech M&A Outlook report, acquisitions by PE firms and their portfolio companies matched those by NYSE- and Nasdaq-traded strategic acquirers for the first time in 2017. As the rush for bolt-ons shows, competition won’t be limited to the big platform deals. Strategics will have to move faster to win smaller, additive deals.
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