Value Tech Investing Shops
I work in credit investing and every since the COVID bubble bursted I’ve been working in on a ton of tech deals. I’ve been thinking about potentially making the switch from credit to PE and think that now is a good time to be a deep value tech shop. Anyone know some shops I should look at? Think Marlin and Siris group play in this space but looks like their funds might be unwinding or going under.
lol..
STG is another name. Think they recruit from the typical banking background through HH though
While I'm all for creative theses and initiative, I'd caution you against assuming that there's a plethora of cheap/value-oriented software businesses. I'd argue that today's multiples for more challenged business are many turns higher than the heydays of ~2001-2015 where you hear stories about firms being paid to take assets off someone's hands, etc.
Don't get me wrong - there's certainly still opportunity, but the multiple inflation makes returns math much tougher (as evidenced by the fund performance and slower deployment pace of some of the value-oriented players).
Other names would include Vector, Francisco Partners (mix of growth and hairier deals including many carve-outs), HIG, Platinum (though not sure of fund status).
Generally agree with your take. Where do you think the value oriented funds need to go in order to succeed / grow in today's software landscape? For example focus more on relative value vs absolute value?
E.g. this company is cheap vs its peer set rather than we only buy things for a certain PF EBITDA multiple?
Edit: not sure why last sentence in my post only partially showed up.. changed some language to see if I can get by this weird WSO bug.
Definitely the billion dollar question. I'm no expert (more focused on the growth side), but I think about a few things:
Yeah these are all the best names for "value" tech IMO
Completely agree, and think a lot of it comes down to how simple a software business is.
If growth slows in a PE backed software business (say a vanilla recurring SaaS with a sticky product), it’s very easy to rip out cost (cut back sales team, off shore developers, etc). So if a business is growing 30% historically at 10% margins and growth starts slowing, any PE fund in the world can quickly turn it into a 10% grower at 20% margins.
I think the true value oriented funds that have been successful in other sectors have a much more complex playbook that vanilla PE firms have a harder time executing. If a manufacturer is underperforming, it’s much harder to manage costs or right size a business without screwing up operations and likely takes a unique skill set to go execute. This allows value players to scoop things up cheap and optimize. But if Thoma/Vista/insert any SaaS PE firm has a mediocre asset, they can typically “clean things up” without needing to fire sale it and can likely pick up a lot of the low hanging value creation stuff prior to a sale.
OP here. You all make good points. There may not be enough assets worth executing on right now, given risk to reward and current valuations for hairy deals. Even though value investing looks attractive, the space is more crowded.
I could be wrong, but I don’t think growth can lead forever. At some point, value should have its moment. This could be the opportunity for firms like FP, STG, Vector, Platinum, and HIG, unless you guys are right that they just have to pivot outside software like tech services or something. Also, I assume LPs don’t directly compare these firms to TB or Vista, aside from FP? And shouldn’t absolute returns matter too? If you’re hitting 20%, even if TB gets high 20s to 30s, that still seems solid. Or is that the wrong way to think about it?
Vector
Is Vector still a respectable shop? ...heard they liquidated a fund recently
No idea honestly, I know that they got a steal of an entry price on one deal but no clue how well they have actually done
I feel like value PE as a whole (not just software) has underperformed over the last 10 years.
I don't think that's true outside of software. HIG has continued to crush it. Platinum was doing well prior to raising a $10B+ fund (jury is out on that), but the fact that they were able to raise that fund means something. You can argue KPS is value oriented and they have had tremendous success over past 10 years.
KPS is extremely value oriented, arguably moreso than HIG and Platinum
Happy to hear more views, but from my understanding, value tech PE is currently in a very very tough spot.
Funds like Siris / Marlin / Vector have all been struggling with both returns and fundraising, and according to many on this forum, these 3 firms might not be able to raise another fund (would be good if someone can confirm on Vector).
For STG, my understanding is that some of their earlier funds have done well, but 2 of their (by far) largest portcos are currently struggling. Trellix went through a debt restructuring last year. RSA's 1st lien debt is currenly trading at 50 cents on the dollar... though Clearlake also co-owns RSA
https://www.bloomberg.com/news/articles/2024-08-20/elliott-jumps-to-front-of-line-in-debt-deal-with-ex-mcafee-unit?embedded-checkout=true
https://www.bloomberg.com/news/articles/2025-04-14/clearlake-backed-rsa-security-creditors-break-off-debt-talks?embedded-checkout=true
And last but not least, Clearlake also plays a bit in the value tech space, but I'm sure many on this forum are aware how that has gone... Ivanti went through debt restructuring earlier this year. Quest Software went thorugh debt restructuring 2 months ago, their 1st lien debt is currently trading at 55 cents on the dollar. Many more if you do a little search.
https://www.bloomberg.com/news/articles/2025-04-22/clearlake-backed-ivanti-reaches-debt-deal-with-some-lenders?embedded-checkout=true
https://www.bloomberg.com/news/articles/2025-06-02/clearlake-overhauls-debt-gets-fresh-capital-for-quest-software?embedded-checkout=true
Agree w/ you that some of these funds are definitely troubled, but I wouldn't purely look at the debt trading levels and assume the equity investment is similarly impaired. A lot of maneuvering can be done at the equity level - some of these funds have already taken out big div recaps (maybe why their debt is trading so poorly lol), done partial sales, and / or other creative methods to get their money back and then some. The equity returns might turn out to be okay even if the debt is trading below par.
None of these names have done big dividend recaps - the primary driver for the trading prices is just high LTV (based on any reasonable current valuation) and for pre-LME names like RSA, an expectation of some kind of LME where lenders will take discount.
There could be equity value in a lot of these companies one day, but if you had to run a sale process for them now, there would most likely not be.
Was at an LP. Don’t think Vector is in as bad of a spot as the others. We were only on a wait and see this time around bec of leadership transitions which has been common for a lot of funds lately
Heard Vector sucks. Employee turnover problem. Can't raise a new fund. Etc. Etc. Avoid.
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