Vista Seeking $1.1B For Second Software Fund

Riding a strong showing in its first fund, Vista Equity Partners is tapping a far more diversified line-up of limited partners this time as it tries to raise a second, $1.1 billion pool directed at mid-market enterprise software deals.

The first fund is on track to return “well over three times cash-on-cash,” said Managing Principal Robert Smith, who founded the San Francisco-based firm in 2000. Vista has exited from a third of the first fund’s portfolio companies, and Smith predicted better returns on the remainder. “The back two-thirds is better than the front one-third,” Smith told Buyouts.

The bulk of the backing for Vista’s debut $1 billion vehicle came from one family. For its second fund, the firm has already landed commitments from AIG, California Public Employees’ Retirement System, General Motors, Horsley Bridge, Lehman Brothers and the New York State Common Retirement Fund, Smith said. All told, Vista has landed commitments of more than $500 million since launching the second fund in January. Smith said he expects to hold a final close in the next couple of months.

Vista seeks to buy enterprise application developers with enterprise values in the neighborhood of $300 million. Its Web site lists 13 portfolio companies. They include Jacksonville, Fla.-based CRAIG/is Ltd., which provides outsourced insurance subrogation services; Kettering, Ohio-based The Reynolds and Reynolds Co., which delivers software solutions and services that support automotive retailing; and Huntsville, Ala.-based Sirsi Corp., which provides software and services for libraries.

Smith said there is no shortage of opportunities since software is a $650 billion industry. But, he added, his firm often has “heavy lifting” to do once it buys a company. “We go in and change the underlying businesses processes at those companies,” he said. “Every one of them becomes [the] low-cost producer in [its] space.”—L.A. & J.H.