Private equity firm Vista Equity Partners, which owns Datto and LogicMonitor, is set to raise as much as $16 billion for a new fund that will pursue software investments and acquisitions, according to The Wall Street Journal. Roughly $14 billion has already been raised for the fund, the report says.
Chatter about the fund surfaces a few days before DattoCon19, a Datto conference that will attract 2,300 MSPs starting June 17 in San Diego. We're checking to see whether Vista Equity investors will be at the show scouting the MSP technology market for potential investments.
Private Equity and the MSP Software Technology Market
As ChannelE2E has pointed out multiple times, private equity is eating the MSP software and technology market.
Key players like Barracuda, ConnectWise, Continuum, Datto and Kaseya have private equity majority owners. SolarWinds MSP also has a major relationship with private equity investors.
In addition to Vista Equity, major private equity firms such as Thoma Bravo and and Insight Venture Partners are working in and around the MSP and MSSP technology market.
And it's a safe bet a new influx of private equity dollars will flow into companies in and around the MSP industry. The dollars certainly offer some potential upside as well as some potential risks for the market.
Private Equity: MSP Industry Rewards -- and Risks
The upside: Companies such as ConnectWise, Datto and Kaseya are profitable unicorns (i.e, valued at more than $1 billion and privately held), Kaseya CEO Fred Voccola has noted. That's a big indication that the MSP market is healthy, growing and primed for new innovation through ongoing investment dollars.
Still, there are some risks, ChannelE2E believes. For starters, software valuations are getting lofty -- as the recent Salesforce buyout of Tableau highlighted. In theory, that means buyers are potentially paying too much for sellers -- which could trigger debt challenges, stock market corrections and asset write downs that pressure buyers down the road.
Also, there are some signs that some MSP-focused software companies are quietly raising their prices or contemplating such a move -- perhaps because private equity firms are gaining a stronger grip on the market and overall industry leverage.
My pricing comments do not necessarily relate directly to the companies mentioned above. ChannelE2E is listening closely to the price increase speculation for potential follow-up reports.
New Vista Equity Partners Fund VII LP
At $16 billion, Vista Equity Partners Fund VII LP would be the largest technology-focused fund ever raised by an independent private-equity firm, surpassing funds raised by rivals such as Silver Lake and Thoma Bravo, The Wall Street Journal reports.
The fund will follow a similar strategy to its predecessor and focus on buying software companies in North America, The Journal says.
