It’s a Saturday afternoon, at the height of vacation season, in one of South Beach’s hottest hotels, and Robert Smith, the founder of Vista Equity Partners, is dressed like exactly no one within a 100-mile radius of Miami: in a three-piece suit.His signature outfit–today, it’s gray plaid, accented by an indigo tie and a pink paisley pocket square–apparently doesn’t take a day off, and Smith isn’t taking one now either. He’s gathered dozens of CEOs from his portfolio companies, software firms all, for a semiannual weekend off-site to drill them in the ways he expects his companies to operate.
It’s not just the suit that’s unusual. Private equity firms almost never treat their portfolio companies, transactional chits by design, like an organic cohort. And until recently, PE, a field built on borrowing against cash-generating assets, wouldn’t touch software firms, which offer little that’s tangible to collateralize. Yet Smith has invested only in software over Vista’s 18-year history, as evidenced by the CEOs, like Andre Durand of the security-software maker Ping Identity and Hardeep Gulati of the education-management software company PowerSchool, who have been summoned to Miami Beach, waiting to swap insights about artificial intelligence and other pressing topics. And Smith deploys more than 100 full-time consultants to improve his companies.
“Nobody ever taught these guys the blocking and tackling of running a software company,” says Smith, an engineer by training, as he takes a lunch break at South Beach’s 1 Hotel to nibble on a plant-based burger. “And we do it better than any other institution on the planet.”
Smith includes the likes of Oracle and Microsoft in that boast, and his numbers back up the braggadocio. Since the Austin-based firm’s inception in 2000, Vista’s private equity funds have returned 22% net of fees annually to limited partners, according to PitchBook data. Smith’s annual realized returns, which reflect exits, stand at a staggering 31% net. His funds have already made distributions of $14 billion, including $4 billion in the last year alone.
Not surprisingly given those numbers, Vista has become America’s fastest-growing private equity firm, managing $31 billion across a range of buyout, credit and hedge funds. Smith is putting all that money to work at a breakneck pace, with 204 software acquisitions since 2010, more than any tech company or financial firm in the world. After finishing an $11 billion fundraising for its latest flagship buyout fund last year, Smith has already deployed more than half of it, focusing as usual on business-to-business software. “They recognize it’s a kind of central nervous system,” says Michael Milken, whose bond-market innovations basically birthed the modern private equity industry and who has been a co-investor in two Vista deals. Taken together, Vista’s portfolio, with 55,000 employees and more than $15 billion in revenue, ranks as the fourth-largest enterprise software company in the world.
Continue onto Forbes to read the complete article.