Title speaks for itself. Wanted to follow up on an overlooked point from the Vista vs. TB thread. They deployed a ridiculous amount of capital (~$60b) in 2021 at incredibly high valuations. Not sure in what world they’re not going to feel the pain pretty soon (while Vista / Silver Lake didn’t deploy much so will likely not feel anywhere near as severe a pinch). Linking the article: https://fortune.com/2024/02/28/thoma-bravo-tech-d…
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By the time they need to mark those down theyll have raised another 100bn...not fucked in the slightest.
They won’t be raising a penny with LPs seeing these investments…regardless of if they’ve marked them down or not, anyone knows they’ll soon be in the heat because of their hyperactive 2021
New LPs will jump at the chance to get an allocation, especially intl $$$ (see ME SWF push). Existing ones, sure maybe some exit the relationship, but many will continue to allocate. They need to put dollars to work and the alternatives are not so enticing either. Cost of doing business.
I'm the "Intern" from the previous thread and this is what I was trying to say. It doesn't really matter what TB deployed in 2021 when they raised 32bn in December 2022 and are about to raise another 27bn by 2025. 2021 will be a blip in their history and will largely be irrelevant if they are in-line with the poor performance of their peers for that fund vintage. One poor fund will not erase the decade of significant outperformance, especially since they'll have raised massive funds since. They deploy one fund at all-time highs and two funds at all-time lows the performance will net out overall.
Why? Public software stocks been a disaster and their investments have held up way better with lower vol. how is that not appealing for LPs?
The thing is no one KNOWS if their investments are holding up because they’re not required to report performance.. it’s just kind of a given that they bought a shit ton of overpriced companies so there’s no way their returns are gonna be great
There were an absurd amount of software take privates by TB at pretty lofty valuations. They could throw them back up in the public equities space if things keep trending upwards but feel like the SW market is not at '21 levels. Will be interesting
They are 100% fucked lol. If it was as simple as buying businesses at a faster-than-lightning clip and paying ridiculous premiums to make that happen, anyone would’ve done it. This is a firm that’s been way too loose with their capital (especially in 2021); anyone actually in the industry knows that the other 2 firms listed are going to fare far better in the long term.
While true in regards to 2021 purchases, Vista has had very meh net performance since the GFC and doesn't really appear to be an end in site there.
I think both firms will be fine - definitely faring better than SLP the way I see things right now.
TB’s gonna have a rough few years with those 2021 investments, and pair that with the fundraising environment (if it stays like this), I wouldn’t be sure at all that they raise 27bn by 2025.
Think it’s a bit hard to call Vista “meh” - not saying they’re definitely going to fare better than TB (bc who fucking knows in this gd industry), but 2023 Tech PE firm of the year (not saying the title means anything, but read about their year, no shitty firm just gets that for free), just had a massive exit with PowerSchool and a similar big exit with Apptio about a year ago, with others sprinkled in between. Stayed much more disciplined in 2021, and even though they still are sitting on one or two bad investments, As of Q1 2023, Vista’s generated a 37.4% gross IRR and 3.12x gross MOIC on the 51 investments fully realized across all private equity strategies since Flagship Fund II began investing in 2000.
Wouldn’t exactly call any of that, now with a new 20B fund, “meh” with an end in sight required, but to each their own I guess
How are competitors like vista or FP positioned relatively?
Private Equity Program (PEP) Fund Performance Review - CalPERS
They have another two years to find liquidity. If the IPO market doesn't open, I don't see any new homes for these larger assets.
Why would you not try and tap the secondaries market? You may still be able to retain some valuation and control.
You will always take a discount to NAV or the last time your fund was marked. Otherwise the secondaries investor will not be interested. This is why secondaries were so hot in 21/22 - you'd rather take the haircut than risk catching a falling knife on the correction.
Better to "spin the wheel" with a strategic or IPO than take a certain 20-25% loss on the fund.
Maybe a continuation vehicle would be the right choice.
What am I missing here on this? It's a 2021 fund so there's like 10 more years left in the funds life for liquidity? Not saying the underlying assets in the fund may have little chance of making a return or even recouping cost but is the 2 years more just your opinion on timeline before everyone realizes those assets are dead $?
For software funds, minimizing hold duration is a selling point to LP's. I am saying the large equity checks written in 21/22 will require an even greater fool in the public markets since M&A activity is focused on trawling and financial acquirers are not paying those multiples anymore and don't have the equity check size appetite needed at current rates to get a deal across the line.
As a result, yes, I think you will see big turds getting kicked barefoot through the shower grate when CalPers and other LP's come knocking.
its all an AUM game
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