What do they know that they're not telling us??? Surely the Vista playbook is not that proprietary, someone can just go hire a bunch of former vista operators and VCG people and do as well, no? How does Thoma do it?
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Vista and Thoma have two different strategies and they are both experts at their respective strategies. TB's is buy and build; Vista's is operational enhancements.
TB's and Vista's strategies work because software is all they do. BX or KKR can't dedicate 100% of their flagship funds to buying add-ons to build up a software company when they have other mouths to feed. Think about it. TB raised a ~20bn fund just to do large cap software PE. BX raised ~26bn to do tech, software, industrials, healthcare, etc. There are more mouths to feed at BX when at TB you're only doing software.
The same idea applies to Vista. KKR has in-house consultants but KKR has REPE, Infra, Energy, industrials, HC, Tech, Consumer, Financial that the consultants have to work across. VCG once again only does software and they still leverage MBB too.
It boils down to the benefits of specialization. Vista and TB are dedicate to being the best at one thing. Other MFs have too many mouths to feed to focus on one area. The same idea goes as to why GA, TA, Insight, Summit, ICONIQ, Accel-KKR, Spectrum, etc. are better Growth investors than Bain, Bx, and KKR.
This totally makes sense. But, please click one deeper. What are the actual tools or processes of that specialization that help them win. E.g., I know they "do" specialization, but what does that "doing" specialization look like. In other words, what are the tactical things that specializing allows them to do differently. Thanks for your response and thanks in advance for any other insight.
They’ve also been doing it a lot longer. KKR, BX, etc have all only gotten focused on software more in recent years. Thoma and Vista have been doing this since 2000 and built up a ton of expertise in the space.
There’s also an element of right place right time for both. If KKR dumped its hold fund in software every year since 2000, my guess is their returns would be great as well just off of the sector growth. When software has outperformed everything over the past 20 years, it’s easy to look smart when you’re competitors are doing 20% software in each fund. Even if their software returns are identical, the fund returns will be a lot lower just off of diversification
Ignore title. Have worked with both TB and Blackstone on Co-investment so can compare.
Will say that I am not sure the poster above is not correct, I have definitely seen TB do operational improvement. E.g. On one deal they fired 25% of the staff, allocated each team it’s own P&L with team manager accountability and held monthly bord meetings. To me at least that sounds operational.
I would say that the biggest difference is the returns they are willing to underwrite and the risk profile they go after. Blackstone are very happy to underwrite a 17% IRR (and look at what their PE strategy has done coincidentally) whereas TB will look to buy something a little bit hairier but with the expectation of higher return. But really they aren’t all that different once the deal is done, look at what Blackstone did on Refinitiv. Was operationally a very successful transformation of a tech business.
How does Silver Lake compare to TB and Vista in terms of strategy and return?
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