The Power of Going Private
For many established software companies, the right LBO can be a new lease on life, growth, innovation and excitement.
By René Bonvanie, Serena Software
Sep. 17, 2007
Serena Software's situation in 2005 was not unique. The application lifecycle management vendor had long delivered tremendous investor returns and excelled at selling to its current customers.
Yet the software business was busy reinventing itself around the 27-year old vendor. And as a public company, Serena's ability to invest in innovation and expansion was hamstrung by its relentless obligation to Wall Street.
Fast forward to 2007. Last week, Serena launched Mashup Composer, an innovative solution which incorporates the latest software trends - software-as-a-service (SaaS), Web services and services-oriented architecture (SOA) - for a new market - business users.
How'd Serena do it? In March 2006, a leveraged buyout led by Silver Lake took Serena private and enabled the company to reinvent itself, making top-line growth and innovation its new mission. Many other software vendors may find that going private is the right move to ensure their company's future.
The Decision to Go Private
Going private is not a move to make impulsively, but for Serena, it made sense. Despite being one of the most profitable companies in the industry, Serena faced several challenges in its efforts to increase stockholder value as a publicly-traded company, particularly around making investments in lower margin, but higher future growth expansion opportunities Serena's efforts to address these concerns were made more difficult by the short-term focus of the public equity markets on quarterly financial results.
The challenge was how to turn a cash machine into a growth machine in order to drive our success into the next era.
In May of 2005, Serena's management team met with Silver Lake, a leading investment firm focused on large scale investments in technology, about going private. After careful consideration, Silver Lake agreed to purchase Serena for $1.2 billion and took the company private in March of 2006.
The LBO enabled Serena to reorganize for top-line growth, while maintaining its commitment to high levels of profitability. Executives have been able to make changes in the company's go-to-market model and product portfolio that would never have been possible had the company remained a public entity.
Finding the right partner is critical. Silver Lake really understands the software business - both from a business and a technology standpoint. As investors, they are clearly on board with our strategy to grow the company.
For software companies considering the opportunity to go private, it is important to have the right expectations. An LBO can give a vendor the opportunity to take three to five years to make technology decisions and business model changes to enhance to long term value of the enterprise. It takes a cohesive vision, firm leadership and established milestones to make an LBO work.
The Power of Rejuvenation
I've been able to work in a variety of software business environments. Before joining Serena earlier this year, I was at Salesforce.com and helped develop AppExchange and the Salesforce.com platform. Prior to that, I spent ten years marketing databases at Oracle and marketed Crystal Reports for Business Objects.
Yet the software business was busy reinventing itself around the 27-year old vendor. And as a public company, Serena's ability to invest in innovation and expansion was hamstrung by its relentless obligation to Wall Street.
Fast forward to 2007. Last week, Serena launched Mashup Composer, an innovative solution which incorporates the latest software trends - software-as-a-service (SaaS), Web services and services-oriented architecture (SOA) - for a new market - business users.
How'd Serena do it? In March 2006, a leveraged buyout led by Silver Lake took Serena private and enabled the company to reinvent itself, making top-line growth and innovation its new mission. Many other software vendors may find that going private is the right move to ensure their company's future.
The Decision to Go Private
Going private is not a move to make impulsively, but for Serena, it made sense. Despite being one of the most profitable companies in the industry, Serena faced several challenges in its efforts to increase stockholder value as a publicly-traded company, particularly around making investments in lower margin, but higher future growth expansion opportunities Serena's efforts to address these concerns were made more difficult by the short-term focus of the public equity markets on quarterly financial results.
The challenge was how to turn a cash machine into a growth machine in order to drive our success into the next era.
In May of 2005, Serena's management team met with Silver Lake, a leading investment firm focused on large scale investments in technology, about going private. After careful consideration, Silver Lake agreed to purchase Serena for $1.2 billion and took the company private in March of 2006.
The LBO enabled Serena to reorganize for top-line growth, while maintaining its commitment to high levels of profitability. Executives have been able to make changes in the company's go-to-market model and product portfolio that would never have been possible had the company remained a public entity.
Finding the right partner is critical. Silver Lake really understands the software business - both from a business and a technology standpoint. As investors, they are clearly on board with our strategy to grow the company.
For software companies considering the opportunity to go private, it is important to have the right expectations. An LBO can give a vendor the opportunity to take three to five years to make technology decisions and business model changes to enhance to long term value of the enterprise. It takes a cohesive vision, firm leadership and established milestones to make an LBO work.
The Power of Rejuvenation
I've been able to work in a variety of software business environments. Before joining Serena earlier this year, I was at Salesforce.com and helped develop AppExchange and the Salesforce.com platform. Prior to that, I spent ten years marketing databases at Oracle and marketed Crystal Reports for Business Objects.
