Forbes - Citrix snares a $16.5B mega-deal

Kevin Dowd

Staff Writer

January 31, 2022

Big Things

Citrix Systems has secured its mega-deal. Getty Images

1. The next big software buyout

Neither Elliott Management nor Vista Equity Partners is any stranger to massive acquisitions. But the two had to team up to find their most massive deal yet.

Elliott and Vista revealed plans today to buy cloud software specialist Citrix Systems for $16.5 billion in cash, the biggest buyout announced yet this year and one of the biggest transactions of any kind to emerge from the pandemic deal boom. The two firms plan to merge Citrix with Tibco Software, an existing Vista portfolio company, to create a massive new provider of remote-access tools, virtualization software and a wide range of other enterprise offerings.

The story of Citrix and Elliott is a long and winding one. Elliott first took a stake in the company in 2015 and promptly embarked on an activist push to transform its operations. Judging by the stock price, it was a rousing success. Citrix shares were trading for less than $60 when Elliott revealed its investment. By the time Elliott managing partner Jesse Cohn left the company's board of directors in April 2020, the stock was nearing $150.

It didn't last, however. Citrix's business boomed after the onset of the pandemic, when its remote-access offerings were all the rage among its corporate clients. Citrix thought that robust growth would continue in 2021. It didn't. As a result, the Florida-based company missed its earnings target in three straight quarters, and its share price plunged nearly 50% since its 2020 high. For Elliott, the thinking is apparent enough. The firm helped add billions of dollars to Citrix's valuation during its first stint as an investor. Now, it will try to do so again.

Elliott and Vista will pay $104 per share for Citrix—a 29% premium to the company's share price as of Dec. 7, the day before reports of a potential deal first emerged, but also about 37% lower than its recent pandemic high.

Vista is also familiar with Citrix. Last March, Citrix bought fellow enterprise software developer Wrike for $2.25 billion, easily its biggest acquisition ever. The seller? Vista, which had bought Wrike for a reported $800 million in 2018. Between Citrix, Tibco and Wrike, that's three different software companies with close ties to Elliott and Vista. The two firms are betting that combining them all into one entity will be the best way to reverse Citrix's recent plunge.

Before today, Vista's largest buyout ever occurred in 2015, per PitchBook when it took Solera private for $6.5 billion. Elliott and its Evergreen Coast Capital private equity affiliate have conducted a handful of billion-dollar deals over the past few years, including the 2018 purchase of Athenahealth for $5.7 billion, but none has yet come close to the size of today's deal.

As fate would have it, Athenahealth was also the subject of the biggest buyout of the past several months: In November, Elliott and co-owner Veritas Capital agreed to sell the healthcare software specialist to Hellman & Friedman and Bain Capital for $17 billion. The software sector has been home to a handful of other recent 11-digit deals. A half-dozen investors clubbed up to buy McAfee for some $14 billion in November, and Thoma Bravo closed its $12.3 billion buyout of Proofpoint in August.

All those deals came when tech stocks were still running wild. But new signs of bearishness have emerged in January. Will that scare off some investors, or will these sorts of massive software transactions continue to proliferate in the months to come? It's a question worth watching.

Elliott and Vista, though, are moving confidently into the future with their new-look software colossus. Sometimes, having five years of familiarity pays off.

CVC Capital Partners is setting the table for a potential IPO in London later this year. Getty Images

2. CVC's succession

It's shaping up to be a year filled with major changes for CVC Capital Partners.

Reports have swirled that the firm is getting ready for an IPO sometime in 2022. And over the weekend, the European investor announced that cofounder and co-chair Steve Koltes will exit his active role as of Oct. 1, the latest example of a private equity founding father stepping back after several decades of work to turn his firm into an industry colossus.

Koltes currently shares the co-chair role with Donald Mackenzie and Rolly van Rappard. Back in 1993, they were three of the executives who spun CVC out from Citigroup as a standalone entity. In the 28 years since, they've built CVC into one Europe's biggest firms, with $125 billion in assets under management spread across a range of private equity, credit and secondary strategies.

It doesn't sound like this will be a huge transformation for CVC. Day-to-day operations will remain in the hands of its board and its managing partners, of which 32 are listed on the firm's website. Symbolically, though, it represents a major shift—the same shift, in fact, that would be heralded by an IPO. After nearly three decades as a private partnership run by its founders, CVC seems to be getting ready for a new, more democratic future as a public company.

Other private equity giants have had to grapple with succession planning of their own. In October, KKR cofounders Henry Kravis and George Roberts stepped down from their roles as co-CEOs, handing control to former co-presidents Joe Bae and Scott Nuttall. A similar change occurred at The Carlyle Group in 2017, when the firm's co-founders gave way to Kewsong Lee and Glenn Youngkin as its new co-CEOs. Youngkin didn't last long in the job, though—and he's since moved on to a different high-profile gig.

Other Things

• The world is probably more aware now than ever before of the perils of climate change and the need to transform the energy industry. But in the meantime, drillers in the Permian Basin are pumping away like never before: Next month, the region expects to produce more than 5 million barrels a day for the first time. And along with the Permian's recent drilling resurgence has come a recent string of deals. In one example, Earthstone Energy agreed today to acquire Bighorn Permian Resources for about $860 million, snapping up more than 110,000 net acres in the Midland Basin (a sub-region of the Permian) that produce more than 42,000 barrels of oil equivalent per day. And in another, Maverick Natural Resources agreed to buy 144,500 net acres in the Permian from ConocoPhillips for $440 million.

• The billions keep piling up at Blackstone. A few days ago, the firm revealed that it added $150 billion in assets during the fourth quarter of 2021 alone. And yesterday, Amit Dixit, the firm's head of private equity in Asia, told Bloomberg that Blackstone has raised $6.4 billion for its second Asia-focused fund—which along with another $4.6 billion from other firm funds, will give Dixit and his colleagues some $11 billion to spend in the region in the months and years to come. Several of Blackstone's rivals have also been stockpiling capital in Asia, a sign that many in private equity think recent growth across some of the continent's major markets will continue. KKR is leading the way, with a $15 billion Asia fund that closed last year.

• CMA CGM is trying to lock down every phase of the supply chain. The global shipping giant agreed today to buy a 51% stake in Colis Prive, a French company that delivers packages to homes for e-commerce clients such as Amazon, with plans to operate the business within CMA CGM's CEVA Logistics subsidiary. The company will have the option to take a further stake at a later date. CMA CGM bought CEVA in 2019, and it expanded the business significantly last August with a deal to acquire Ingram Micro's supply-chain business for $3 billion. Colis Prive had previously planned to go public in Paris last year, but it called off the debut in July, citing market conditions.

• Elsewhere in the wide world of logistics, AEA Investors thinks the time might be right to sell Scan Global Logistics, a Danish company that offers a range of services related to managing supply chains and shipping. The private equity firm has begun working with Barclays on a potential exit, according to Bloomberg, with hopes of fetching €1.5 billion (about $1.7 billion). AEA has owned Scan Global since 2016, and since then it's built the company out through a series of acquisitions, including the purchase of the U.K.'s Horizon International Cargo less than three months ago.

• For the second time in the past year, the dealmakers behind the series of Mountain Crest Acquisition SPACs is striking in the digital health market. ETAO International, a digital healthcare provider focused on the Chinese market, said it plans to merge with the third blank-check vehicle in the Mountain Crest franchise, resulting in an enterprise valuation of $2.5 billion. In October, the second Mountain Crest SPAC completed a merger with Better Therapeutics, which offers digital health tools for patients with Type 2 diabetes, heart disease and other cardiometabolic diseases. This move into healthcare represents an abrupt shift for Mountain Crest and its leader, Suying Lee: The first Mountain Crest SPAC's merger target was Playboy Enterprises.

• In the latest sign of its evolution away from handheld devices and toward cybersecurity and other software, BlackBerry announced plans to sell the bulk of its legacy patents related to mobile devices, messaging and wireless networking for $600 million to a special-purpose vehicle called Catapult IP Innovations. BlackBerry emerged early last year as a modest meme stock, with its share price spiking around the same time that companies like GameStop and AMC launched a frenzy. BlackBerry shares are down some 50% since their 2021 peak, but they're still up more than 70% compared to where they spent most of 2020, taking the company's market cap to $4.7 billion. The meme craze has faded, but for some companies, it's had a lasting impact.

• The auction for Boots has begun, according to Bloomberg. Walgreens Boots Alliance has reportedly launched a sale process for the U.K.-focused pharmacy chain, with hopes of reaching a valuation of £7 billion (about $9.4 billion). If a deal materializes, it will mark the end of an entity that has existed for barely seven years, dating back to Walgreens' takeover of Alliance Boots for north of $15 billion at the end of 2014. Several buyout firms are circling the business, per the report. A joint bid from Bain Capital and CVC Capital Partners is said to be the early favorite, while Advent International, KKR, TDR Capital and Sycamore Partners have also expressed interest.

• Education industry giant Pearson is expanding its presence in the world of professional learning with a deal to buy the rest of Credly that it doesn't already own, valuing the digital credentials specialist at $200 million. Credly works with employers, professional associations, training providers and other groups to offer certifications for learners who have completed programs. The company says it has issued some 50 million such credentials since its founding in 2012. Pearson already owns about 20% of Credly, having first backed the New York-based company in 2018.

• Solar infrastructure investor NextEnergy Capital closed its latest fund on $896 million, marking the firm's largest fund ever and exceeding a $750 million target. The vehicle will target deals across the U.S., Portugal, Spain, Chile, Poland and other countries, a wider remit than NextEnergy's previous fund, which focused on the Italian market. Earlier this month, NextEnergy sold a portfolio comprising 105 solar plants and 149 MW of power in Italy that had been owned by that prior fund. The British firm has invested in 324 solar plants across seven countries since its launch in 2007, and it claims $3.2 billion in assets under management.

Things To Read

Facebook is turning into Meta. As you might expect, a wholesale transformation of one of the world's biggest companies can get a little messy. [The New York Times]

Microsoft has largely avoided the spotlight in the recent regulatory drama around Big Tech. There are about 69 billion reasons why that's a fact that might soon change. [Recode]

Plant-based meat was supposed to be the next big thing. What if the market has already peaked? [Financial Times]

One industry consultant says its obvious why investors like Blackstone and Starwood Capital are pouring billions into extended-stay hotels: "They print money." [The Wall Street Journal]

After 25 years of investigating gangs, extremists and hate groups, a former FBI undercover agent is ready to tell his story—and to sound a warning. [Rolling Stone]

Kevin Dowd

Staff Writer

I am a staff writer at Forbes. I previously wrote for PitchBook, where I created The Weekend Pitch, a weekly newsletter about the private markets. Before that, I covered high school sports in the Pacific Northwest, and I graduated from the University of Washington with a degree in journalism and creative writing. I live in Seattle, where I read a lot of books and play a lot of golf.

Follow me on Twitter.

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Forbes - Citrix snares a $16.5B mega-deal

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