Andy on Enterprise Software

The Private Side of Informatica

April 8, 2015

Yesterday Informatica announced that it was being bought, not by a software firm but by a private equity company Permira. At £5.3 billion, this values the data integration vendor at over five times the billion dollar revenue that Informatica saw in 2014, compared to an industry average of 4.4 recently. This piece of financial engineering will not change the operational strategy for Informatica. Rather it is a reflection of a time when capital is plentiful and private equity firms are feeling bullish about the software sector. Tibco and Dell have followed a similar route. Company managers will not have to worry about quarterly earnings briefings to pesky financial analysts, and will instead be accountable only to their new owners. However, private equity firms seek a return on their investment, usually leveraging plenty of debt into such deals (debt is tax efficient compared to equity), and can be demanding of their acquisitions. From a customer viewpoint there is little to be concerned about. One exit for the investors will be a future trade sale or return to the stock market, so this deal does not in itself change the picture for Informatica in terms of possible acquisition by a bigger software company one day.