Contrary to initial impressions, Salesloft acquiring Drift it's not a conventional acquisition. Instead, Vista Equity Partners, the powerhouse in the private equity realm, holds a majority stake in both companies and has seamlessly merged them. This move positions them to challenge industry giants like HubSpot. But Salesloft and Drift are just the tip of the iceberg; major private equity firms are gearing up for a wave of strategic consolidations that could reshape the SaaS landscape.
The Vista Equity Advantage
Back in March 2023, we delved into the extensive portfolio of Vista Equity Partners, highlighting their strategic positioning in the face of point solution consolidation. While some point solution vendors are already being absorbed by larger players like HubSpot, Salesforce, and Clari, major private equity firms are emerging as key players to watch.
The Merger Strategy
Private equity firms face challenges in selling off their holdings in a tough market, leading them to explore alternative strategies. Instead of divesting, they opt to merge portfolio companies where they hold a majority stake. This serves a dual purpose:
a) Selling the merged entities for a larger multiple
b) Building more established players with the potential to go public
Vista Equity's Diverse Portfolio
A closer look at the Vista Equity portfolio reveals the depth and breadth of their influence:
- Salesloft (Sales Automation)
- Drift (Conversational Marketing)
- Gainsight (CX Platform)
- Pipedrive (CRM)
- Khoros (Customer Engagement)
- Xactly (Compensation)
- BlueConic (Data & Analytics)
- iCIMS (HR & Recruiting)
Other Key Players
Vista Equity is not alone in this strategy. Thoma Bravo and Hellman & Friedman are also making waves with their portfolios:
- Thoma Bravo: Apttus + Conga (majority stake), Anaplan, Medallia, Pendo, Qlik, Starburst
- Hellman & Friedman: Zendesk, Genesys, IRI, UKG, Sprinklr
The Wider Impact
The ripple effect extends beyond existing portfolio companies. As point solution providers face market pressure, companies like Outreach, Zoominfo, Formstack, Lusha, Dooly, Chili Piper, and Qualified find themselves vulnerable. Startups that thrived during the 2021 boom now face the challenge of sustaining their valuations.
Anticipating the Future:Predicting the next wave of acquisitions becomes a fascinating exercise. As unsustainable valuations make new funding harder to secure, expect private equity firms to engineer mergers, creating new competitors seemingly out of thin air. Major players may also enter new markets through significant acquisitions.
Conclusion
The SaaS landscape is undergoing a seismic shift as private equity firms strategically navigate the challenges of a competitive market. The merging of Salesloft and Drift is just the beginning, with Thoma Bravo, Hellman & Friedman, and others poised to reshape the industry. As we speculate on the next targets for acquisition, one thing is certain – the SaaS ecosystem is in for a transformative journey orchestrated by these influential private equity players.
