Tibco taken private by Vista Equity Partners for $4.3B

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In an unusual move, Tibco has announced that the firm has been acquired by Vista Equity Partners for $4.3 billion, the largest buyout in tech this year. The sale followed a strategic review of options, following disappointing results: profit in the most recent quarter had fallen to $1.5 million, a precipitous drop from the $8.8 million a year ago. The company’s stock is down 23% in the last 12 months.

I have heard little about the company’s work technology solution, tibbr, in recent months. The product is an example of the now conventional social collaboration model: activity-stream-based communications, user profiles, defined shared contexts, file sharing, and integration to external applications.

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Faced with competition like Microsoft/Yammer, IBM Connections, SAP, Jive, and many, many others, tibbr has had a tough run in a tight market. It will be interesting to see what new developments follow Tibco’s acquisition.

As I said yesterday, this sort of work technology is becoming a commodity, something that the giants of the industry will provide for next to nothing while making money in other ways (see Even connection is becoming a commodity). The pressures on a smaller firm like Tibco will make it hard to compete in that new environment.

Vista Equity Partners is an unusual firm, run by the highly impressive Robert F. Smith, a former Goldman Sachs technologist who worked with Apple on bringing Steve Jobs back to Apple through the acquisition of NeXT, along with a strong of other huge deals. He left to found Vista, because he wanted to make those decisions, not just advise others.

Unlike many equity firms, Vista generally does not strip out operational costs to turn its acquisitions around. Instead, Smith invests additional sales and engineering resources. And the firm has very unusual hiring:

David Gelles, A Private Equity Titan With a Narrow Focus and Broad Aims

[…] instead of searching for candidates with Ivy League degrees and prestigious internships, Vista looks for workers who have leadership potential and innate analytical abilities.

Using a personality test first developed by IBM that gauges technical and social skills, as well as a candidate’s interest in the arts and humanities, Vista assembles a decidedly unusual work force. Last year, the firm used the test to pare down more than 125,000 job applicants and offered just 6,000 jobs, often to unlikely candidates.

One of Vista’s best software salesmen used to be a roofer. Another previously worked at a Verizon store, and went to making $240,000 a year, from $22,000. In Iowa, a pizza deliveryman took the Vista aptitude test, got an A, and was offered a job paying $43,000 annually.

Not only are many of these workers less expensive than their better-credentialed peers, but to Mr. Smith, they are often more driven to succeed. And employing them, he believes, provides a social good.

“We find those kind of people and put them to highly productive use for decades,” Mr. Smith said.

Vista says turnover at its companies is the lowest in the software business. After Vista acquires companies, Mr. Smith says, they release more reliable software more frequently, customer satisfaction rises and profitability improves. And most Vista companies have 25 percent to 60 percent margins, he adds.

Vista’s portfolio is a long list of unsexy software companies, most of which I have never heard of. Aptean is a “leading provider of industry-specific solutions that help businesses manage their resources, supply chains, employees, and customer relationships.” But Vista has made a great deal of money, returning a 31% annual rate of return since 2000. The firm has never lost money on over 110 investments and acquisitions. An amazing untold story.

It’s uncertain what the path forward is for Tibco, but I will be watching with intense interest to see what Smith is up to, in the years ahead.

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