High Software Valuations Act as a Barrier to Entry for Generalist Buyouts
Orlando Bravo · Private Equity Masters 7: Orlando Bravo – Thoma Bravo (Capital Allocators, EP.206) · Aug 2, 2021 · at 50:31
Orlando Bravo, founder of private equity firm Thoma Bravo, explains how steep public and private software multiples insulate specialized tech buyout firms from new PE competitors.
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“The fact that valuations have been high, some claim too high, Actually, it's a barrier to entry. It keeps big players that could be new players or new entrants out of this market. There should be 20 or 30 private equity firms doing large buyouts and software. It's a great place to be. But if you have to pay 10 times forward revenue for a company that does five percent even that margin at scale, and you don't have a track record of having delivered 40 to 50% margin While growing that business, an investment committee is not going to take that risk”
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