More public private equity

by Scott Denne

Although the volume of overall tech acquisitions by private equity (PE) firms has declined a bit from last year’s record, the number of take-privates continues to increase. The latest of such deals is Francisco Partners and Elliott Management’s $4.3bn purchase of LogMeIn – a typical take-private from what’s becoming an atypical source.

According to 451 Researchs M&A KnowledgeBase, buyout shops have erased 42 tech vendors from public markets this year, the second-most of any annual total and seven more than they bought in 2018. In acquiring those companies, they’ve spent $74bn, the second-highest annual outlay for such transactions. (The highest came in 2016, the year that Dell, a Silver Lake portfolio company, shelled out $63bn for EMC.)

In some ways, LogMeIn is a typical LBO – it’s a large, profitable public company that’s struggling to put up growth. Garnering a 3.4x trailing revenue multiple on the sale, its valuation sits right in line with the annual median for take-privates this year. But unlike LogMeIn, fewer vendors are coming off the major US exchanges.

As sponsors are spending more than usual on take-privates, they’re having to go further afield to do it. For just the second time in the decade, PE firms are purchasing fewer companies that trade on the Nasdaq or NYSE exchanges than public companies that trade elsewhere.