Vista and Blackstone in talks to acquire software maker Smartsheet, sources say

By Milana Vinn

NEW YORK (Reuters) - A private equity consortium including Vista Equity Partners and Blackstone is in talks to acquire Smartsheet, a U.S. maker of workplace collaboration software with a market value of about $7 billion, people familiar with the matter said on Thursday.

A deal could be signed in the coming weeks if the talks don't fall apart, the sources said, requesting anonymity as the discussions are confidential. The terms being discussed could not be immediately learned.

Smartsheet's shares jumped nearly 10% on the news on Thursday, before trading was briefly halted.

Reuters was first to report in July that the Bellevue, Washington-based company was working with Qatalyst Partners to review acquisition offers from private equity firms.

Smartsheet did not immediately respond to requests for comment. Vista, which holds a 4.7% stake in Smartsheet, and Blackstone declined to comment.

The deal talks come as private equity-led dealmaking has rebounded in recent months, amid anticipation of upcoming U.S. interest rate cuts.

Buyout firms have been actively targeting deals in sectors such as technology and services this year, after sitting on the sidelines for most of 2023 due to high interest rates that made financing of leveraged buyouts tougher. Private equity deal volumes jumped about 41% during the first half of the year, driven by several take-private deals.

Smartsheet's software allows organizations to manage, track and automate their workflow using a single platform, offering more features and capabilities than Microsoft's Excel.

It focuses on big corporate clients that have complex operations, such as Pfizer, Cisco and American Airlines, serving 85% of the Fortune 500 companies, according to its website. Some of its competitors offering similar products, like Asana and Monday.com, target smaller companies.

Smartsheet invests in its growth at the expense of its bottom line, generating strong sales while posting losses. It has been trimming these losses as it improves its profit margins.

The company reported revenue growth of 20% to $263 million during the first fiscal quarter ended April 30. Its net loss narrowed to $8.9 million, compared to $29.9 million a year ago. Smartsheet's free cash flow stood at $45.7 million, compared to $31.3 million a year ago.

"Smartsheet seems on a better footing than a year ago, with a less uncertain macro, a new head of GTM (go-tomarket) making positive impact, optimized pricing, a $150 million share buyback plan, and product innovation (self-discovery of advanced features; embedding more AI)," Jefferies analysts said in an Aug. 9 note.

Smartsheet is expected to report its second-quarter earnings later on Thursday.

(Reporting by Milana Vinn in New York; Editing by Anirban Sen and Deepa Babington)