Blackstone, Vista Equity Partners, and Abu Dhabi Investment Authority have agreed to acquire Smartsheet, the cloud-based work management platform, for around $8.4 billion in an all-cash transaction. The deal, which values Smartsheet at $56.50 per share, represents a 41 percent premium to the company's 90-day VWAP for the period ending July 17, when Reuters first published rumors of the potential deal.
Smartsheet’s platform is used by 85 percent of the Fortune 500 and helps with enterprise data organization, task management, and process automation. It went public in 2018 after receiving early backing from Madrona Venture Group and Insight Partners.
Blue Owl Capital is leading a $3.2 billion financing package in support of the deal, including a $2.9 billion annual recurring revenue (ARR) loan and a $300 million revolving credit facility. At least 20 other lenders are participating, including both Blackstone and Vista's credit arms.
The financing provides quick feedback on the extent of relationship damage (or lack thereof) caused by Vista's Pluralsight drop-down in June of this year. Media coverage at the time included a series of ominous quotes from participating lenders, who said they were "apoplectic" over the firm's attempt at liability management and claimed it could “have tremendous impacts on the relationship.”
“The world is watching,” one lender told the Financial Times, adding that they were caught off guard by the maneuver because “Vista has had a reputation of standing behind deals and caring about their brand.”
But, just a few months later, it's back to business as usual: Smartsheet lead lender Blue Owl Capital and participants Golub Capital and Benefit Street Partners were all involved in the Pluralsight ordeal. Either Vista's efforts at damage control worked, or the allure of the current deal was too strong.
The Smartsheet financing wasn't entirely smooth sailing, however. Vista and Blackstone were forced to provide a handful of concessions to get the deal over the line, including additional credit agreement protections against future liability management exercises. Final pricing of SOFR+650 came in at the top end of the targeted 625 - 650 range, and the sponsors agreed to a longer non-call period.
The deal also includes an option for Smartsheet to pay a portion of its interest in kind at a rate of S+700.
The rest of the Smartsheet lender cohort includes HPS, Farallon, Elliott, Carlyle, Brinley Partners, GoldenTree, Monroe, New Mountain, Ontario Teachers’ Pension Plan Board, AllianceBernstein, Hercules, Cliffwater, Canyon Capital, Jefferies, Macquarie, and Brigade Capital Management. Other Pluralsight lenders absent from the current financing include Ares, Oaktree, Goldman, and BlackRock.
Smartsheet reported second quarter ARR of $1.1 billion (a 7.7x transaction multiple) with 17 percent year-over-year growth. The deal includes a 45-day "go-shop" period, during which Smartsheet can solicit alternative proposals. But, given the healthy premium, there’s not likely to be a superior offer.
Qatalyst Partners is acting as exclusive financial adviser to Smartsheet, while Goldman Sachs Group and Morgan Stanley are advising Blackstone and Vista Equity Partners. The transaction is expected to close in the fourth quarter of Smartsheet’s fiscal year ending January 31, 2025.