On Wednesday, Canaccord Genuity changed its rating on Smartsheet Inc . (NYSE:SMAR) stock from Buy to Hold, adjusting the price target to $56.50 from $60.00. This move follows the announcement that Smartsheet has consented to a private acquisition by Vista Partners and Blackstone (NYSE:BX).
The deal, valued at $8.4 billion, translates to $56.50 per share, offering an 8.5% premium over the closing price on Monday and a 25% increase since mid-July.
The agreed acquisition price is approximately 6.5 times the enterprise value to revenue and 28 times the enterprise value to free cash flow based on projected 2025 figures, which analysts view as a fair valuation for both parties involved.
Smartsheet, a company known for its steadfast growth and increasing profitability, has not garnered the public market valuation its financial metrics would typically command.
This discrepancy is attributed to potential factors such as the competitive nature of the collaborative work management (CWM) space and the presence of a faster-growing competitor, Monday.com.
The transaction is seen as an opportunity to realize additional value for Smartsheet's long-term investors. Analysts suggest that the high subscription gross margins and the significant sales and marketing expenses as a percentage of revenue present an opportunity for the financial buyers to enhance profitability over time. Furthermore, given Vista's existing investments in the sector, there may be potential for consolidation within the industry.
The acquisition is not entirely unexpected, as Smartsheet is considered a high-quality business in the early stages of a go-to-market and pricing/packaging transformation that could lead to accelerated growth and improved margins.
With the expertise of Vista and Blackstone in the sector, it is anticipated that a more substantial, efficient Smartsheet could potentially return to the public markets in the future. In light of the acquisition news, the firm has aligned its rating and price target with the takeover price.
In other recent news, Smartsheet Inc. has been acquired by private equity firms Blackstone and Vista Equity in an all-cash transaction valued at $8.4 billion, with shares priced at $56.50 each. In response to this significant development, William Blair adjusted its Smartsheet stock rating from "Outperform" to "Market Perform," while JPMorgan downgraded Smartsheet to Neutral from Overweight, aligning its price target with the acquisition per-share price.
The acquisition is anticipated to bolster Smartsheet's market position, providing it with access to considerable resources and industry expertise. Concurrently, Smartsheet reported a 17% increase in revenue for the second quarter of fiscal year 2025, amounting to $276.4 million, and a similar rise in its annualized recurring revenue, reaching $1.093 billion.
Amid these developments, Stephen Branstetter, Smartsheet's Chief Operating Officer, resigned and transitioned to an advisory role as part of the company's restructuring of its executive structure. These recent developments mark a new phase for Smartsheet as it transitions from a public entity to a privately held company under the ownership of Blackstone and Vista Equity.
InvestingPro Insights
As Smartsheet Inc. (NYSE:SMAR) navigates its acquisition by Vista Partners and Blackstone, InvestingPro data and tips provide a snapshot of the company's financial health and market performance. With a market capitalization of $7.71 billion, Smartsheet's impressive gross profit margin stands at 81.61% for the last twelve months as of Q2 2025, showcasing its ability to efficiently manage costs relative to revenue. Despite a negative P/E ratio reflecting current unprofitability, analysts are optimistic, expecting net income growth this year, which is substantiated by 10 analysts revising their earnings estimates upwards for the upcoming period.
InvestingPro Tips highlight that Smartsheet holds more cash than debt, a positive sign of financial stability, and the company is predicted to become profitable this year. However, the stock is currently trading near its 52-week high and at a high Price/Book multiple of 11.49, suggesting a relatively high valuation. For investors looking for deeper insights, there are additional InvestingPro Tips available that provide further analysis and context on Smartsheet's financial position and market potential.
With the acquisition set to potentially unlock value for long-term investors, these metrics and insights from InvestingPro could be crucial for shareholders evaluating the offer's fairness and for prospective buyers considering the company's future prospects.
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