TA Associates plans on investing $1.5-$2 billion in recapitalizations and buyouts of technology companies over the next four years, and it's also gearing up to begin raising its next fund, a $3 billion vehicle, in March, said Brian Conway, managing director in Boston. TA's current fund is the $2 billion TA IX, raised in 2000.
The spending is driven in part by higher deal prices, as well as the firm's keen interest in software companies. An M&A wave is beginning its sweep through the software industry, Conway said, citing a recent report from Gartner which predicted that consolidation will trim the current roster of 6,000 software companies down to 1,500. TA is doing its part, agreeing to buy Information Technology Solutions from Intuit for $200 million in a deal announced last week. Conway said TA has few competitors among private equity firms for these businesses besides Golden Gate Capital in San Francisco.
Last week, TA announced another technology deal: a combined $739 million investment alongside Madison Dearborn Partners in MetroPCS Communications, a wireless company.
Conway wants to build up ITS' customer base and add product lines that can be packaged as part of a software suite. Intuit was reluctant to add products because it didn't consider ITS a core business, Conway said. "This company wanted more product acquisitions but Intuit didn't back them." TA will help the company pick up products through acquiring possibly five companies with $10 million in revenues. It will also consider larger companies for mergers.
TA favors taking its portfolio companies public when it can, Conway said, adding that selling ITS to a strategic acquirer is not likely.