Smartsheet stock upside ‘limited’ after acquisition by Blackstone and Vista

On Wednesday, Smartsheet Inc . (NYSE:) experienced a shift in stock rating as William Blair adjusted its outlook from “Outperform” to “Market Perform” following the company’s acquisition announcement. Smartsheet, a work management platform, has agreed to be acquired by private equity firms Blackstone (NYSE:) and Vista Equity in an all-cash transaction valued at $8.4 billion.

The acquisition price is set at $56.50 per share, which is an 8.5% increase over the closing price on Monday and a 41% premium over the volume-weighted average price of Smartsheet’s shares for the 90 trading days ending July 17, 2024, prior to when acquisition rumors surfaced. The valuation of Smartsheet at the acquisition price stands at 6.3 times the firm’s calendar 2025 revenue estimate and 28.8 times its 2025 free cash flow estimate.

The transaction multiples are in line with those of similar recent acquisitions within the industry, such as New Relic (NYSE:), which was acquired in July 2023 at a 6.3-times revenue multiple, and Cvent, acquired in March 2023 at a 6.2-times revenue multiple.

The comparison suggests that Smartsheet’s acquisition falls within a reasonable range given the current market conditions for companies with similar growth rates.

The decision to downgrade Smartsheet’s stock rating reflects the immediate outcome of the acquisition agreement and the subsequent change in the company’s investment profile.

With the acquisition price now set, William Blair’s adjustment indicates 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.

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