Robert Smith's Vista Has a Compelling Investor-Return Story
Bo Emerson/Atlanta Journal-Constitution via AP
Robert Smith's Vista Has a Compelling Investor-Return Story
Bo Emerson/Atlanta Journal-Constitution via AP
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As public markets continue to be roiled by the pandemic, political instability in Washington, and so-called meme investing orchestrated on social media platforms, private equity is emerging as a more reliable alternative, especially for institutional investors like insurers and pension funds.

The strengths that private equity brings to investors are many, including access to obscure but promising companies as well as rare deals and profits that often eclipse those seen on the public market.

It’s no surprise, then, that private equity showed remarkable resilience in 2020, despite a shutdown that brought the economy to its knees. Indeed, private equity investment activity in the U.S. totaled $708 billion last year — down from 2019 but sufficiently robust and filled with some surprising wagers on industries that had, in the past, been overlooked.

But not all private equity firms are created equal, and identifying those that are poised for the most growth in the post-pandemic economy can be daunting. It involves a deep understanding of their particular investments and their performance in recent years.

This brings us to Vista Equity, which like others, had to contend with a tattered 2020 economy. Vista also suffered its share of internal challenges, including a deal its CEO reached to settle a tax issue with the federal government.

Yet through this tumult, Vista emerged as one of the most enviable performers in the private equity space. In fact, Vista returned a total of $7.3 billion in private equity and permanent capital to its investors in 2020, making it one of the year’s top-20 performers.

So, what’s the secret of Vista’s success? Much of the answer lies in the audacious bet that the firm has for years placed on so-called enterprise software, a space that includes companies providing high-tech solutions to challenges that businesses, schools, governments, and other organizations increasingly face in a 24/7 and connected work world.

Indeed, tech was a big winner for private equity in 2020, far outpacing every other area of investment. Investors poured more than $65 billion last year into roughly 2,130 private equity deals with information technology companies in the U.S. The fourth quarter of 2020 was particularly noteworthy as it relates to the technology space, with more than $30 billion in investments, an increase of 90 percent from that quarter in 2019.

For its part, Vista blazed the trail by adding even more depth to its already premier portfolio of technology companies. Consider its investment in SmartBear, not exactly a household name but one that may well be in a few years. Why? Because it provides software development solutions at a time when developers are working at a feverish pace to meet demand. And with Vista’s backing, the company is poised to reshape the market even more than it already has. 

Another measure of the depth added to Vista’s portfolio is its recently completed acquisition of another unlikely high-tech star, Pluralsight, an online training company that provides educational courses to IT professionals. Pluralsight’s co-founder and CEO said of the deal, “We are excited about the completion of this transaction and look forward to leveraging Vista’s resources and financial strength to continue to innovate across our product portfolio and deliver solutions that help companies strengthen technology skills, become more agile, and achieve their goals.”

One of the other secrets to Vista’s success is its diverse leadership, which undoubtedly brings a wide range of perspectives to every investment decision the firm makes. Vista recently appointed Rachel Arnold to co-head one of its premier funds alongside René Stewart, making it one of the largest buyout funds in the world led by two women.   

“Rachel helped launch the Endeavor Fund, and it is a privilege to now partner with her to co-lead one of the world’s largest tech buyout funds led exclusively by women,” said René Stewart, Senior Managing Director and Co-Head of the Vista Endeavor Fund.     

Vista’s success comes as it seeks to turn the page on a tumultuous period that it has gone through internally, including negotiations that its CEO had to undertake with the federal government to resolve a tax issue that some thought would prove a distraction and overshadow the company’s indisputable record of performance.

That issue appears to be behind Vista, as the firm remains a profit-generating machine for any analyst and investor who are focused on the numbers.       

And those numbers tell a compelling story.

John Burnett is the managing director and founder of 1 Empire Group, a consulting firm. He is an Adjunct Assistant Professor at NYU.

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