Exclusive-Vista, Blackstone in talks to acquire software maker Smartsheet, sources say

NEW YORK: A private-capital consortium that includes Vista Equity Partners and Blackstone is in talks to acquire Smartsheet, a U.S. maker of workplace collaboration software that has a market value of about $7 billion, people familiar with the matter said on Thursday.

A deal could be signed in the coming weeks if talks don’t fall apart, the sources said, requesting anonymity because the discussions are confidential. The terms discussed could not immediately be known.

Smartsheet shares rose nearly 10 percent on Thursday following the news, before trading was briefly halted.

Reuters first reported in July that the Bellevue, Washington-based company was working with Qatalyst Partners to review takeover offers from private equity firms.

Smartsheet did not immediately respond to requests for comment. Vista, which owns a 4.7 percent stake in Smartsheet, and Blackstone declined to comment.

The talks about the deal come against the backdrop of a revival in deals by private equity players in recent months, in anticipation of upcoming U.S. interest rate cuts.

Buyout firms have been actively targeting deals in sectors like technology and services this year after sitting on the sidelines for most of 2023 as high interest rates made it difficult to finance leveraged buyouts. Private equity deal volumes rose about 41% in the first half of the year, driven by a handful of take-private deals.

Smartsheet software enables organizations to manage, track, and automate workflow using a single platform with more features and capabilities than Microsoft Excel.

It focuses on large enterprise clients with complex operations, such as Pfizer, Cisco and American Airlines, serving 85 percent of the Fortune 500, according to its website. Some competitors with similar products, such as Asana and Monday.com, target smaller companies.

Smartsheet is investing in its growth at the expense of its bottom line, generating strong sales while posting losses. It is reducing those losses by improving its profit margins.

The company reported a 20 percent increase in revenue to $263 million in its fiscal first quarter ended April 30. Its net loss narrowed to $8.9 million, from $29.9 million a year earlier. Smartsheet’s free cash flow was $45.7 million, compared with $31.3 million a year earlier.

“Smartsheet appears to be in a better position than it was a year ago, with less macro uncertainty, a new go-to-market (GTM) boss exerting positive influence, optimized pricing, a $150 million share repurchase plan, and product innovation (self-discovery of advanced features, building in more AI),” Jefferies analysts said in an Aug. 9 note.

Smartsheet is expected to report its second-quarter financial results on Thursday.