Seattle-based enterprise software company Smartsheet is reportedly in talks with private equity firms, including Vista Equity Partners and Blackstone, regarding a potential acquisition. Following this news, Smartsheet’s stock rose nearly 10% before settling with a 4% increase as the company prepared to release its second-quarter earnings. CEO Mark Mader declined to comment on the acquisition talks during the earnings call, even though Reuters had previously reported that Smartsheet had hired investment bankers due to buyout interest from private equity firms. The company’s stock has increased by 20% in the past six months, with a market capitalization of around $7 billion.
In Smartsheet’s second-quarter earnings report, released after the market closed, revenue grew by 17% to $276.4 million, with an operating loss of $8.5 million compared to $36.1 million in the previous year. Despite the positive financial results, there was no mention of the company exploring M&A or other strategic alternatives in the report. Smartsheet provides cloud-based enterprise work management technologies for project management, collaboration, data storage, task automation, and assignment capabilities, with 85% of the Fortune 500 as its customers. Competitors include Asana, Monday.com, and Microsoft.
Founded in 2005 and going public in 2018, Smartsheet has over 3,300 employees and reported a 20% increase in revenue year-over-year to $263 million in its first fiscal quarter, surpassing analyst estimates. Net losses were reduced from $29.9 million in the same period the previous year to $8.9 million. Vista Equity Partners, a Texas-based firm with over $100 billion in assets, acquired other Seattle-area tech companies like Apptio in 2019 and Avalara in 2022. Vista currently holds a 4.7% stake in Smartsheet, indicating a potential interest in acquiring the company.
M&A activity within the tech industry has slowed down in recent years, leading to “pent-up demand (and supply), particularly in the private equity universe,” as noted in a report by PwC. With private equity firms showing interest in acquiring companies like Smartsheet, the industry could see an increase in deal-making activities. As the market continues to evolve, it will be interesting to see how Smartsheet navigates these acquisition talks and whether an agreement will be reached with any of the interested private equity firms. The company’s strong financial performance and market presence make it an attractive target for potential acquirers looking to expand their portfolio in the enterprise software space.
