Which funds were most disciplined during COVID?
I guess my question skews more towards tech PE firms.
I'm reading on this thread about how Vista and TB (apparently, Vista much less so than TB and other funds) both over deployed capital at high multiples. Would be curious to see which funds and investors were disciplined enough to not over deploy and I guess came out of covid / high multiple period as winners.
TA - have heard that they incentivize partners to exit an investment once it hits a specific MOIC hurdle (I believe it’s between 3-5x but not sure, I don’t work there). This led to them selling a lot of companies during COVID/ZIRP and getting a ton of DPI back to LPs, whereas other funds took the markups to TVPI and are slowly marking them down today. Helps explain why fund XV was 16.5B and raised in ~6 months when every other fund couldn’t raise a penny.
To be fair they also deployed at high multiples for new investments during that time as well
Definitely wouldn’t lump Vista and TB together here as the former deployed significantly less capital in 2021 (TB deployed $58.2bn compared to Vista’s $7.1bn). Night and day. It’s a different question whether Vista’s discipline was due to intelligence or just complete luck, but either way they probably will not have much of a fallout from this period while TB is much more likely to. But TB is TB, not trying to say that they’re going to be circling the drain soon or anything like that — just that they are likely to have the most problem child portco’s in the near future out of most MFs. Theres a good article about this in Fortune; relevant quote below:
“Perhaps the winner of this time period may come from a firm that avoided large deals that year, namely Vista Equity Partners. The firm founded by Robert Smith is typically a very acquisitive dealmaker but was busy with other things in 2021, including dealing with the departure of Brian Sheth, a co-founder and former Vista president. Vista in 2021 made 53 announced acquisitions, valued at $7.1 billion, according to Dealogic.”
For context, here’s the top 5 2021 deployers if you don’t wanna read the article:
1. Thoma Bravo ($58.2b)
2. TPG ($28.3b)
3. H&F ($24.4b)
4. Permira ($25.3b)
5. Advent ($20.8b)
All of these are names to keep an eye on, but especially TB (more than double the next name down the list). I’d argue (as does this article) that Vista would actually be an answer to your original question as they were one of the most disciplined funds during COVID.
Would read the article if you have some time, it’s an interesting one:
https://fortune.com/2024/02/28/thoma-bravo-tech-deals-2021-bubble-vista…
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