Sources say Exclusive-Vista and Blackstone are in talks to buy software maker Smartsheet

By Milana Vinn

NEW YORK (Reuters) – A private equity consortium including Vista Equity Partners and Blackstone is in talks to buy 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.

If the talks do not fail, an agreement could be signed in the coming weeks, the sources said, requesting anonymity because the talks are private. The terms discussed were not immediately known.

Shares of Smartsheet rose about 10% on Thursday following the news, before trading was briefly halted.

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

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

The deal talks come after a pickup in private equity-led deals in recent months amid expectations of upcoming U.S. interest rate cuts.

Buyout firms have actively targeted deals in sectors like technology and services this year after sitting on the sidelines for much of 2023 due to high interest rates that make financing leveraged buyouts difficult. Private equity deal volumes rose nearly 41% in the first half of the year, driven by several take-private deals.

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

According to its website, it focuses on large enterprise customers with complex operations, such as Pfizer, Cisco and American Airlines, and serves 85% of the Fortune 500. Some of its competitors, such as Asana and Monday.com, which offer similar products, target smaller companies.

Smartsheet is investing in growth at the expense of profits, generating strong sales while losing money, and reducing those losses while improving margins.

The company reported revenue growth of 20% to $263 million in the first fiscal quarter ended April 30. Its net loss narrowed to $8.9 million, compared with $29.9 million a year earlier. Smartsheet’s free cash flow was $45.7 million, compared with $31.3 million a year earlier.

“Smartsheet appears to be in better shape than a year ago with less uncertain macro, a positively impactful new GTM (go-to-market) head, optimized pricing, a $150 million share repurchase plan and product innovation (self-discovery of advanced features; greater AI deployment),” Jefferies analysts wrote in an Aug. 9 note.

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

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