Dry Powder: The Private Equity Podcast
The Take-Private Playbook
Jul 30, 2024
Discover how a growing number of investors are taking mid-sized companies private, particularly in the B2B software space. The conversation highlights the surging trend of take-private deals since 2018 and the impact of changing capital costs. Delve into the shift from a 'growth at all costs' mindset to a balanced focus on profitability among tech firms. Learn about the complexities of the 'rule of 40' and the challenges faced by public companies striving for sustainable growth and margin expansion.
13:41
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Quick takeaways
- The rise in take-private transactions among mid-sized companies reflects a response to increased pressure on public valuations amid changing economic conditions.
- Private equity firms are focusing on improving profitability and operational efficiency in vulnerable mid-sized tech companies to significantly enhance their enterprise value.
Deep dives
Rise of Take-Private Transactions
Take-private transactions have seen significant growth, particularly among mid-sized businesses, as the number of such deals in the US has doubled since 2018. In 2022 and 2023, these take-privates remained elevated, driven by a shift from an era of easy money to a new landscape with rising costs of capital. This has placed increasing pressure on public company valuations, making them attractive targets for private equity investors who can identify opportunities in a challenging M&A environment. Notable firms such as Toma Bravo, Apollo, and Vista have actively pursued these companies, which are often trading at valuations significantly below their potential.
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