Follow-up: Smartsheet acquisition: Competing bids unlikely; $8.4B deal could fuel other private equity buyouts
Smartsheet announced Tuesday that it agreed to be acquired by private equity firms Blackstone and Vista Equity Partners in a deal valued at $8.4 billion.
The all-cash acquisition will make Smartsheet a private company again, six years after the Bellevue, Wash.-based enterprise software company went public.
The announcement follows multiple reports over the past several months from Reuters about a potential deal. The company’s stock price has risen more than 30% since June.
Shares of Smartsheet were up more than 6% in early trading Tuesday.
The $8.4 billion purchase price ($56.50 per share) represents a premium of about 41% to the volume weighted average closing price of Smartsheet stock for the 90 trading days ending July 17, before Reuters’ initial report on the potential deal.
The deal is expected to close in January, pending shareholder approval and a 45-day “go-shop period” that allows Smartsheet to solicit other potential acquirers.
Smartsheet makes cloud-based enterprise work management technologies for managing and tracking projects, collaborating, storing data, and automating and assigning tasks, among other capabilities. It serves 85% of the Fortune 500 as customers.
Its competitors include Airtable, Asana, Atlassian, ClickUp, Monday.com, Planview, and Wrike. Features of Google, Microsoft, and Adobe products also compete with Smartsheet’s capabilities.
The company reported its fiscal second quarter earnings earlier this month. Revenue increased 17% to $276.4 million. The company’s operating loss was $8.5 million, vs. a loss of $36.1 million in the same period a year ago.
Smartsheet, which launched in 2005, has more than 3,300 employees. There are no immediate updates on headcount or impact to the company’s headquarters location.
“Our next phase of growth and customer success is underway, and we look forward to partnering with Blackstone and Vista Equity Partners to accelerate our vision of modernizing work management for enterprises, globally,” Smartsheet CEO Mark Mader said in a press release.
Vista Equity Partners, an Austin, Texas-based firm with more than $100 billion in assets, previously acquired other publicly traded Seattle-area tech companies including Apptio in 2019 (Apptio sold to IBM last year) and Avalara in 2022. Vista currently holds a 4.7% stake in Smartsheet.
Blackstone, meanwhile, recently gobbled up Seattle-based pet-sitting giant Rover in a $2.3 billion deal.
M&A activity has slowed in the past few years, creating “pent-up demand (and supply), particularly in the private equity universe,” according to a recent report from PwC.
Stephen Branstetter, the chief operating officer at Smartsheet who joined the company in 2013, resigned last week, according to a regulatory filing.
Smartsheet, which won the Next Tech Titan award at the 2016 GeekWire Awards, originally focused on project management, effectively taking the best design elements of Microsoft Excel and combining it with a robust cloud environment on the backend.
“In 2005, our founders set out to build a universal application for work management. They realized that the ‘killer app’ for team work management, tracking, project management, team collaboration, and flexible reporting did not exist,” the company wrote in its IPO filing in 2018. “…Our founders developed Smartsheet to be the universal answer to which all email and spreadsheet users could graduate because of its spreadsheet-like user interface and email-integrated design.”
Smartsheet later invested heavily in various automation tools and more recently has rolled out various AI features. The company now allows customers to create formulas and get answers from natural language queries, for example.
Mader joined the company in 2006, helping lead Smartsheet from a 6-person startup that sprouted in a small Kirkland, Wash. residential house to an IPO.
The company was founded by John Creason, Eric Browne, Maria Colacurcio, and Brent Frei. Mader, Browne, and Colacurcio also worked at Onyx, a customer relationship management company acquired by M2M Holdings for $92 million in 2006.
It hasn’t been a completely smooth ride for Smartsheet. The company faced slow adoption in its early days and made a key decision to reinvent the design of its product.
As Frei explained in 2015, Smartsheet initially incorporated too much of its historical enterprise software DNA into the product, making it difficult for customers to figure out what to do.
“We knew that there was an answer if we could just get the design right. So much came down to the design — could we get the product to behave the way we wanted,” Frei said in 2015. “I am very envious of companies like Uber and Apple and others who have figured out that user experience that is just so darned awesome that you don’t have to learn anything, it just does it all for you. And that is a real art.”
Speaking at an event in 2017, Mader said that it took Smartsheet 10 years to reach $50 million in annual revenue, and just 17 months to double that. He said the company’s “tipping point” came when it became equally focused on product and distribution versus just on building the software.
The company’s early investors included Seattle-based Madrona Venture Group and Insight Venture Partners. Madrona managing director Matt McIlwain remains on the board of directors.