Sunny Gupta decided to sell his company in October 2018 during a bathroom break at dinner with his chief financial officer and fellow co-founder Kurt Shintaffer.
Gupta is the co-founder and CEO of Bellevue-based Apptio, a company that helps clients monitor their technology spending.
Apptio closed its $4.6 billion sale to IBM Corp. (NYSE: IBM) last August. But back in 2019, the company made another splash when it sold to private equity firm Vista Equity Partners for $1.94 billion.
Over dinner at Monsoon in Bellevue, Gupta and Shintaffer were discussing a potential deal with about four people from Vista Equity and a few bankers. The nearly six-hour meeting went until 11 p.m., as the group dined on catfish claypot, wok-tossed lamb, drunken chicken and crispy imperial rolls.
Gupta, sipping on Hendrick’s with soda, liked the Vista Equity team. A private equity acquisition and going off the Nasdaq was what his heart felt was best.
“We also felt like they understood us really well, and obviously they picked up the dinner,” Gupta recalled. “We weren’t even thinking private equity at that time. That night, I remember at 9 or 9:30, I was like, ‘Kurt, I think we can really build an amazing company with Vista.’”
But a $1.94 billion deal doesn’t happen overnight, let alone over one dinner. It was a monthslong affair that led to the Vista acquisition, including a mad-dash scramble at the end that almost derailed the deal.
Meals before deals
The sale process started on July 26, 2018. Gupta was hosting a surf-and-turf dinner at his waterfront Kirkland home for Apptio’s board. Apptio had received some light acquisition interest from larger companies that would strategically integrate Apptio’s services. The company, founded in 2007, helps clients like Bank of America, FedEx, Nike and Allstate see what return they’re getting on their tech spending, a valuable add for a potential strategic buyer.
Over summer salads and Pahlmeyer wines from Napa Valley, Gupta brought up the acquisition talks. He still wanted to grow the company independently, but he and the board decided it was at least worth exploring a potential sale.
“The specific guidance was Apptio is not up for sale,” Gupta said. “We don’t want to put up a ‘for sale’ sign, and that’s a very delicate balance.”
Apptio turned to investment bank Qatalyst Partners to engage potential buyers, and the firm told Gupta the company should put together an investor deck. In the company, only Gupta and Shintaffer knew Apptio was preliminarily looking into a sale. Gupta started making calls in August, but the process moved slowly. Many people were taking time off during the summer. Plus, the due diligence and processes of selling to a larger company take time.
Gupta had told the company’s bankers he and the board weren’t interested in a private equity deal. Private equity firms create an edge by closing deals fast, and Apptio didn’t want to rush strategic buyers. But given the close connections in the tech and finance worlds, Gupta got a call on Oct. 11 while he was in London from Monti Saroya, senior managing director at Austin-based Vista Equity Partners.
Gupta, who was making customer visits in Europe at the time, knew the team at Vista but still wasn’t interested in a private equity deal. Saroya insisted, however, that the Vista team come meet with Apptio in Seattle.
Vista’s visit to Seattle involved a fair amount of secrecy.
Gupta didn’t want to cause a stir with employees, especially given talks were just preliminary for the time being, and he didn’t want outsiders catching wind of a potential deal.
Instead of hosting the Vista team at the office, Gupta and Shintaffer met with the group in a conference room at the Bellevue Club. The group talked about metrics and strategy for about four hours on the afternoon of Oct. 18 before heading to Monsoon, where they needed a room in the back to avoid the public eye.
Shintaffer was impressed by the amount of homework Vista had already done on Apptio, as it became clear very quickly Vista had been tracking Apptio’s performance and listening to earnings calls.
The dinner was a two-way interview, as Shintaffer and Gupta needed to decide whether the private equity firm was going to be a good partner for years to come. Shintaffer said he was mostly interested in Vista’s plans with Apptio. Would the company get to make acquisitions and grow? Would the team be able to stay on? Or was Apptio simply going to get lumped into another Vista portfolio company?
“We had to trust them because there’s nothing in the purchase documents that say what that’s going to be,” Shintaffer said. “We had to trust that we were going to be the center-of-gravity company that does the add-ons.”
Shintaffer was surprised at how much he liked the Vista team, a fact he shared with Gupta during their bathroom sidebar. When the group left Monsoon that night, Vista was a real front-runner and not just a long shot meant to drum up competition and escalate the bid.
A long weekend
The day spent with Vista, which declined an interview request for this story, changed Gupta’s thoughts on a private equity acquisition.
The ability to grow as a private company with a new owner sounded appealing to him. Shintaffer and Gupta did some vetting of their own on Vista by talking to portfolio company leaders and asking if it made good on its promises, and the references backed Vista’s credibility.
At 1:30 p.m. on Nov. 2, 2018, a Friday, Apptio received Vista’s offer. Saroya said Vista wanted to buy Apptio by Monday.
If the tight window wasn’t challenging enough, it was compounded by the fact that Gupta, an avid Seahawks fan, had tickets to that Sunday’s game against the Chargers.
“I’m really stressed out. I’m like, ‘Monti, I’m tied up all day Sunday. Then Sunday night after watching the Seahawks game, I have to fly to Las Vegas because it’s the kickoff for our main (Technology Business Management) Conference,’” Gupta recalled. “He was like, ‘No, no, no. This thing has got a fuse, and we’re not going to negotiate beyond that.’”
Gupta called an emergency board meeting Friday after getting the initial offer, which Apptio didn’t like. After rejecting the offer, Gupta spent all Saturday taking calls with bankers, negotiating with Vista and talking with his board. He couldn’t sleep Saturday night, and the work continued into Sunday.
At the Seahawks game, Gupta had to step away from the action for roughly a quarter to take more calls. As the Seahawks lost 25-17 that day, the Apptio deal was still in play.
Gupta didn’t fly to Vegas for the conference Sunday night as planned, opting to fly Monday evening instead. The conference started Tuesday morning, and Gupta spent Monday negotiating. He got Vista to extend the deal deadline to Tuesday, but that was as far as the private equity firm was willing to go.
Finally, after days of back-and-forth, Vista and Apptio agreed on a price Tuesday. At the conference, Apptio was hosting hundreds of chief information officers from some of the company’s premier clients. The event was at the Bellagio’s Tuscany Kitchen, where Apptio employees were putting on live cooking shows for the clients. Gupta was still finalizing details with Vista and had to jump in and out of the event to take calls.
Both sides eventually worked out the details just as Gupta was about to give a keynote address in front of hundreds of chief information officers.
Right before going on stage, he told Apptio Board Chair Tom Bogan he wanted to back out of the acquisition.
A walk to remember
Bogan is no stranger to high-pressure situations.
His resume includes multiple tenures as CEO and president of different companies. He spent more than five years as a partner at Greylock, which has invested in household names like Facebook and Airbnb, as well as Apptio. He was vice chairman of the publicly traded HR software company Workday for almost two years.
Gupta considers Bogan a mentor. The two have known each other for over 25 years, as a previous company of Gupta’s called Vigor Technology was acquired by Bogan’s company Rational Software back in 1998. Bogan has hosted Gupta at his Cape Cod and Palm Springs-area homes. Gupta even raised a funding round for Apptio at one point by taking multiple phone calls from Bogan’s balcony in Cape Cod.
When Gupta started panicking about the deal right before his Las Vegas keynote speech, Bogan helped him take a moment.
“He was really struggling with this decision,” Bogan said. “I said, ‘Listen, if we need to delay this thing 15 or 20 minutes, everybody’s here. They’re not going anywhere. We’ll delay it, but just take whatever time you need.’”
He and Gupta took a walk in the desert heat. Gupta talked about his concerns, namely that the company was still in its early days, and he wanted to keep running it independently.
Bogan countered with facts Gupta already knew but needed to hear out loud again. Gupta would still be running the company. Apptio could make acquisitions and important business changes without the scrutiny of the public markets. Investors and employees with equity would get a serious payday, and customers would still be well taken care of. Above all, Bogan told Gupta to trust his instincts, and even though Bogan thought it was a good offer, it was still Gupta’s decision to make.
It was all Gupta needed to hear.
“I called the banker right before I stepped onto the stage, saying ‘We’re doing the deal,’” Gupta recalled. “I jumped on, gave my keynote for 15 minutes, came back, called the Vista team and congratulated them.”
Despite all the outside distractions, Bogan remembers that Gupta “crushed the conference.”
Gupta then called his wife, Prerna, who was less than surprised given that she and Gupta had talked about agreeing to the deal roughly five times already. He said she has always been supportive of his entrepreneurial journey and provided a rational, objective voice during the sale to Vista. She, too, reiterated to Gupta that he would still be able to run the company how he sees fit under the new ownership.
The day after agreeing to terms with Vista, Apptio held its analyst day for investors. Gupta and Shintaffer had to go through the motions as if Apptio was planning to grow as a stand-alone company. Shintaffer said one analyst remarked on how relaxed the duo seemed compared to normal.
After the deal officially closed in January 2019, the Apptio executive team celebrated at Ascend Prime Steak and Sushi in Bellevue, which sits on the 31st floor of the Lincoln Square South tower. For Gupta and his team, it was a chance to unwind after a whirlwind six months.
Shintaffer said he didn’t realize Gupta almost bailed on the deal in Vegas until afterward.
“I’m incredibly glad he didn’t tell me before because I might have gotten weak-kneed as well,” Shintaffer said.
Now, Apptio has gone through a second acquisition, finally with a strategic buyer in IBM rather than a private equity firm. Gupta said the deal will expand Apptio’s reach faster than Apptio could have done on its own. Still, he believes the Vista journey had to happen in order to become relevant to a company of IBM’s size.
The lessons from the first acquisition have stuck with Gupta. When Bogan was visiting Seattle in June before the IBM deal was announced, Bogan had breakfast with Gupta and Prerna.
“He didn’t tell me a thing about (the deal), which is exactly what he should have done,” Bogan said.
