As private equity money earmarked for buying technology companies grows, targets are getting harder to find, at least in the United States. One solution is to create new ones.
Insight Partners is buying Swiss-headquartered Veeam for $5 billion, relocating the cloud-data backup firm to the United States and replacing its Russian co-founders on the company's board. The goal is to tap American growth, and at some point sell out of the business at a handsome profit. Putting a "made in the USA." sticker on it can only help. Think of it as a bid for the "patriot premium."
Assets under management at private equity funds targeting technology doubled between 2013 and 2018 to over $500 billion, according to Preqin, and Silver Lake Partners, Thoma Bravo and Vista Equity Partners collectively attracted over $40 billion into funds birthed in 2019.
There are only so many US software, fintech and cloud companies, so private equity firms are increasingly looking overseas. Hellman & Friedman bought a German online auto classifieds business for $3.2 billion in December, while Insight itself purchased an Israeli cybersecurity firm at a $1.1 billion valuation a few days ago.
Much of the attraction in buying Veeam is that it still has scope for generous growth in the United States - a market that is to tech companies today what it was to British musicians in the 1960s. There's still the perception that success in Silicon Valley confers a cutting edge.
Veeam gets a majority of sales in Europe, Africa and the Middle East. If it can make further inroads in the American market, and particularly the cloud businesses of Amazon.com and Microsoft, it could easily more than double sales in the next few years to over $2 billion.
That may explain why the company says it will "become a US company, with a US-based leadership team." The founders, Andrei Baronov and Ratmir Timashev, will step down. Being more American - albeit with big development operations in Russia - should reassure new clients, and not just government ones.
Moreover, if the White House's protectionist approach to technology endures, Insight will find it easier to use Veeam to buy up US rivals, sell to another buyer, and ideally list it later on US markets at a higher valuation. It's arbitrage, stars-and-stripes style.
Insight Partners said on Jan. 9 it had agreed to buy Swiss cloud-data backup and management firm Veeam in a deal valued at about $5 billion.
The private equity firm says Veeam will become a US company, with a US-based leadership team. Co-founders Andrei Baronov and Ratmir Timashev will step down from the company's board of directors.
Veeam's revenue increased 22.4% to $427 million in the first half of 2019, compared with the same period a year earlier, according to IDC.
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