Francisco Partners Fundraise
Just saw that Francisco raised 13.5bn for their flagship fund and 3.3bn for their agility (MM) fund. Any updated thoughts on Francisco? And how do you view Francisco compared to SL, Vista, and TB? What's the associate experience their like/comp?
Always curious when firms increase fund size this much so quickly.
On one hand, every time I interact with FP (from the banking side) I’m impressed. Represented them as both buyer and seller and they’re always very sharp, but good quality businesses, etc
My skepticism is that every business they’ve bought from my bank has been $500M, often closer to the $200M side of things. Their bread and butter is buying software business for $250M and selling it for 3x in 5 years, and they’ll need to move up market to support a fund of this size.
Post cut off. What's your skepticism?
Oops didn’t realize it cut off -
They buy tons of business in the $200-$500M range. They have a great strategy for finding/valuing businesses of that size.
With a new fund this big, they’re going to need to be spending $1b+ on each deal (unless they just do massive volume of deals), and they just aren’t as experienced in that space. Previously they’ve been in very MM processes, so it’ll be interesting to see how they play against the bigger players - Thoma, Vista, other MFs.
Just an entirely different strategy to buy a $200M business and selling it for $1b vs buying it for a billion and selling for $5b
I'm a bit skeptical that buying a $500mm vs. $1bn software business is actually that different. Less growth, greater margins, more mature processes, more sophisticated capital stack, and different set of exit options. The actual process of evaluation should be the same though. Since I assume from your post you'd disagree with this take, in what way would you disagree?
I think it can go either way. On the one hand, what you said seems mostly true - fundamentally as businesses there isn't some massive gap here, particularly given software's margins means a 500m v 1bn software co might only be like 50m v 100m revenue (spitballing). That's a big gap in businesses, but nothing near the difference in scale between industrial companies for example.
There's definitely something to be said though that the "magic" of whatever FP is doing right in searching for businesses to purchase might be a lot less effective as the funnel of companies available for purchase at the higher price range narrows significantly. The question is then, if FP's magic is more in the search for purchases or in what they do after the purchase.
I think it’s obviously case by case, but there’s just (generally) more “juice to squeeze” the lower down market you go - operating efficiency, experienced executives, M&A, etc are all great things to do if a company hasn’t done before, but it’s harder to optimize margins/growth profile/other basic “blocking and tackling” if the previous owner has already done all of it.
At a MM tech group that does everything from ~$200M (tropically founder owned) to $1B+ (typically PE owned) and they’re vastly different types of companies.
Historically I’ve seen FP buy more of the founder owned stuff where they can come in off the bat and make simple improvements, start doing M&A, bring in some advisors who know what they’re doing, etc.
If you’re buying the business from a MM tech fund (which you typically need to do at the $1B+ size range), the previous sponsor will likely have taken a lot of that easy stuff already
Saw that PR-- was surprised they have $23Bn of dry power (that's over half total AUM) but think that likely means they largely under-deployed the last flagship at the peak of software valuations which is probably a good omen for returns of this vintage
Bump
Bump
Bump
From second-hand info:
Returns have been stellar. Two of their most recent funds hit 4x MoM.
The associate experience is intense. Doesn't surprise me though given their dry powder/associate. Haven't heard anything about comp unfortunately.
My hunch is that they're likely hurt less by this tech correction than some comps (esp. TB/Vista) since they are more balanced between value/growth tech PE deals. Will be interesting to see if they can navigate this environment/maintain returns.
Bump- thoughts in FP vs. Silver Lake?
FP is much easier to compare to TB and Vista than it is to Silver Lake, given the SaaS focus (whereas SL also does a lot of internet, media, and hardware investments).
All 4 are world-class firms and anyone with the opportunity to work at any of them should 100% take it, BUT, that being said, if I HAD to stack rank the four, it would probably go something like this:
1A: SL, TB
1B: Vista
1C: FP
Might be controversial, and I can see why people may argue that the above is wrong, so feel free to take it with a grain of salt.
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