Best/biggest PE firms that focus on software?

What are the best PE firms that focus on software? And do you guys view this sector to be a promising one for PE in the next decade since software is since an important part of our economy?

Comments (36)

 
  • Associate 3 in PE - LBOs
Jan 12, 2021 - 12:55pm

Thoma Bravo, Vista, Francisco Partners, Hg... there are a seemingly endless number of software firms now.

Yes, it is not just a good sector, but by many accounts, the sector.

 
  • Consultant in Consulting
Jan 12, 2021 - 12:59pm

Thanks for the information. Because it's a popular sector, have you noticed that it's more competitive to get into these software-based firms?  

 
  • Associate 3 in PE - LBOs
Jan 12, 2021 - 1:10pm

It depends. It's very difficult to get a job at Vista or Thoma as it is Apollo or Bain LBO. But the feeders are different. For a place like Vista, you either need to show supreme interest in the B2B SaaS sector, or have experience in a strong TMT group (e.g., they won't just let in anyone with no serious interest or experience). Whereas with Apollo or Bain, I've seen people come from different backgrounds (from generalist consulting to energy IB to generalist IB... etc.). Does that make sense?

 
  • Consultant in Consulting
Jan 12, 2021 - 2:03pm

Absolutely. Thanks.  Yes, I'm trying to get into a group in SF that does software IB, and was hoping that would give me a leg up on a software PE position -- sounds like it would.   

Regarding a broader question, do you think that if I delay PE recruiting until my second year (to give myself a chance to see if I like IB/my group), that will still give me a strong chance at PE (if I'm in a software IB group)? Or, based on your experience, do you think chances at PE diminish if you don't recruit on-cycle right after you start as a first year analyst? Thanks for the info. 

 
Most Helpful
  • Prospect in Research - Other
Jan 13, 2021 - 12:04am

Sorry going to have to invalidate this. Vista and Thoma generally don't care what banking group you came from. Know 2 people at Vista and 1 at Thoma with the following backgrounds: leveraged finance, industrials coverage, and M&A.
 

Despite what this site might make you believe, group doesn't actually matter all that much as long as you've got the stuff and are proactive networking. 

 
Jan 16, 2021 - 1:25am

This is true. While it is difficult to get a job at any of these firms, getting a job at Vista/TB/FP etc while it may not be technically/experientially harder to get in, it is more important to craft your story better with these firms for getting a seat. As someone who did get a seat at a traditional MF, I did have two friends who were in tech banking (one in MM and one in BB) who recruited for the Vista/TB/FP class of funds and they definitely could attest to the need to articulate and demonstrate a desire to work in the tech space - much more than could be asked for interviewing for a generic MF role. I am not saying one is easier than the other at all. But it is important to recognize that there is an additional element while recruiting for a sector-focused fund such as those we've discussed in this thread

 
Jan 13, 2021 - 11:40am

Capital is pouring into the sector chasing returns of the last decade.  Public software companies - unless they suck - are routinely valued at 20-30x sales, if not more.  That's as clear a signal as any to entrepreneurs that they should create more software assets and excess returns are likely to be competed away.

 

Past performance not indicative of future results.    

 
Jan 13, 2021 - 12:15pm

Would add Silver Lake, Marlin Equity, Clearlake, New Mountain Capital, and Golden Gate as a few other large names that invest in the space. The latter three are technically generalist funds but have historically invested in software deals frequently. To the earlier comments, most funds care first and foremost about hiring smart, motivated, normal people. IB group is secondary, though it certainly doesn't hurt to be in a good TMT group if your ultimate goal is to end up in software PE.

Edit: Bain Capital Ventures is another high-profile name that plays in the space but they tend to focus more on venture / growth deals vs. traditional later-stage buyouts like the names mentioned above.

 
Jan 13, 2021 - 8:31pm

Most of the software-focused heavy hitters have already been mentioned but returns/prevalence of opportunities in the software sector have been so high over the last decade (and it's only accelerating) that pretty much every big generalist firm is building out a dedicated tech team. Also a long tail of new funds being formed to go after these deals. If you can get a job at a Vista/Thoma/Insight, that's obviously great but there are also a lot of new $500M-1B software-focused funds out there that might be easier for folks to get a first gig at if they don't have the shiniest resume. Obviously more risk with those firms but if you're bullish on software, then you should believe that most of those firms will eat too.

Array
  • 1
 
Jan 13, 2021 - 10:34pm

To piggyback, one consideration, generalist funds are sometimes "sticker shocked" by the buy-in multiples required in software deals (e.g., versus business services deals), so tech teams embedded in generalist firms can have harder times competing on growthier deals and/or more frustration at deploying capital (due to lack of IC support). Not a deal breaker but something to weigh if not joining a pureplay software shop.

 
  • Managing Director in IB-M&A
Jan 14, 2021 - 7:13am

This...also add extremely fast processes (e.g., 2 week DD to singing), extremely adjusted EBITDA/run-rate adjustments (e.g. future price increases/cost cut realizations), as well as aggressive add on multiples (makes it difficult for smaller shops to find decent sized platforms)

 
  • Associate 1 in IB-M&A
Jan 14, 2021 - 2:30pm

Thoma and Vista are #1 for being the most active and best returns - Vista is definitely not trending downwards, have you not seen their recent exits/acquisitions?

 
  • Analyst 1 in IB-M&A
Jan 15, 2021 - 12:15pm

On the MM side, I'd add in LLR, they're a very solid shop as far as I can tell, and they've got some smart people there for sure.

 
  • Prospect in IB-M&A
Jan 15, 2021 - 1:41pm

As someone mentioned already, Clearlake's been big in the space recently. On the more legacy/lower growth side, you see CD&R, KKR, Bain, GGC

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