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Alteryx on Monday reached an agreement to be acquired by private equity firms Clearlake Capital Group and Insight Partners for $4.4 billion.
Under the terms of the agreement, Alteryx's stockholders will receive $48.25 per share upon closing, which remains subject to customary closing conditions and approvals and is expected during the first half of 2024.
Once the acquisition is complete, Alteryx, a data management and analytics vendor that first went public in 2017, will become a privately held company.
Due to slow growth in recent quarters, the acquisition wasn't a surprise, according to Doug Henschen, an analyst at Constellation Research.
After a strong fourth quarter in 2022 when revenue rose nearly 75% over the fourth quarter of 2021, year-over-year revenue growth was 26% during the first quarter of 2023 and fell below 8% during the third quarter of this year.
Meanwhile, Alteryx's stock, which peaked at more than $178 per share in July 2020, dipped below $30 per share in August 2023 before rebounding slightly.
Doug HenschenAnalyst, Constellation Research
"I'm not at all surprised [by the acquisition]," Henschen said. "The company had announced it was exploring a sale after a few quarters of poor results."
Despite an emphasis on automation and other capabilities aimed at helping enterprises effectively manage their data, Alteryx is still transitioning from developing primarily on-premises tools to cloud-native tools. Private equity firms, meanwhile, have established a pattern of purchasing data management and analytics companies as they make that transition, noted David Menninger, an analyst at Ventana Research.
Informatica, Qlik, Cloudera and Tibco were all acquired while making cloud-native capabilities their main focus.
"I was not particularly surprised," Menninger said. "Not because I expected Alteryx to be positioning itself for a sale, but because the private equity firms have seen an opportunity to invest in software companies as they go through their transition to the cloud."
A slow move to cloud
Alteryx, along with vendors such as Informatica and SAP, is among the well-known independent data preparation vendors.
Like its peers, Alteryx's data modeling tools were initially aimed at data engineers, data scientists and other data experts. As self-service analytics gained traction, Alteryx made ease of use a priority with low-code/no-code features and tools aimed at reducing the number of clicks to model data.
Alteryx, however, was slow to introduce cloud-based capabilities, unveiling its first cloud-native tool in May 2021. A full cloud-native version of its platform was not made generally available until February 2023.
Conversely, Informatica launched its Intelligent Data Management Cloud in April 2021.
Alteryx's executive management team was overhauled beginning in 2020 when Mark Anderson took over as CEO. Other executive moves included Alan Jacobson being hired as chief data and analytics officer in April 2019, Paula Hansen's promotion to president in February 2022 and Keith Pearce became chief marketing officer in February 2022.
That executive overhaul resulted in an emphasis on cloud-native capabilities.
Unlike its slow embrace of the cloud, Alteryx was among the first data management vendors to introduce generative AI capabilities, introducing an AI engine named Aidin in May 2023.
In its September earnings report, Alteryx projected full-year 2023 revenue to be up 11% to 12%. Comparatively, full-year 2022 revenues were up 60% over 2021.
"Alteryx was late to the cloud and it has also had a fair amount of executive turnover in recent years, all of which have intensified the headwinds of tougher economic conditions," Henschen said.
In addition to some self-inflicted problems, Alteryx has faced stiffer competition in recent years, Henschen continued.
Beyond its historic rivals, traditional analytics vendors Qlik and Tableau have expanded their data preparation capabilities. In addition, the tech giants offer data modeling platforms such as Amazon SageMaker and Google's Vertex AI.
Alteryx's acquisition benefits
Being acquired, therefore, was not only expected but also most likely beneficial, according to Henschen. With revenue growth down, getting acquired will provide Alteryx with financial flexibility and time to reorganize.
"It's good for Alteryx because it needed financial backing and restructuring without scrutiny as a public company," Henschen said. "It had few options other than to be acquired."
That financial backing was a key reason Alteryx agreed to get acquired, Anderson said in a press release, along with "increased working capital" and the "flexibility" Alteryx will be afforded as a private company.
Qlik similarly was a public company that got acquired by a private equity firm. Following five years as a subsidiary of Thoma Bravo during which it as able to reorganize and add data integration as a core capability, Qlik filed paperwork for an IPO in January 2022 but has held off due to unfavorable market conditions for IPOs.
Like Henschen, Menninger noted that going private will benefit Alteryx, removing some of the scrutiny that comes with being a public company.
In particular, getting acquired will enable Alteryx to continue advancing its cloud-native capabilities.
"Alteryx has made significant progress in its transition to the cloud, but it still has more work to do," Menninger said. "It's a lot easier to do that without the scrutiny of quarterly reporting and other disclosure requirements of being a publicly traded company."
Investing heavily in such a transition slows short-term revenue growth, he continued. When no longer publicly traded, that slowdown remains private news.
"The private-equity companies recognize this and see an opportunity to back the companies as they go through this transition with the expectation that the companies will be worth more after they complete the transition," Menninger said.
Getting acquired has the potential to not only help Alteryx but also benefit the vendor's customers.
Alteryx has more than 8,000 customers, according to its third-quarter earnings report. That compares favorably to Informatica, which in 2022 reported having 5,000 customers. And as recently as the start of 2022, Alteryx was in a strong enough position to make a significant acquisition of its own, acquiring data wrangling specialist Trifacta for $400 million.
If Clearlake Capital Group and Insight Partners deliver on their stated promise to support Alteryx's continued advancement, customers will benefit, Menninger noted.
"As long as the investors recognize the importance of customer experience and do not impose draconian cost-cutting measures, the net result should be positive for customers," he said. "They get an accelerated transition to the cloud and a heightened focus on what is really important. The experience we've seen from other similar deals suggests that customers don't need to be worried."
Henschen added that Alteryx's customers have reason for optimism. But with the same caveat that it's important that Alteryx's new parent companies foster product development and don't cut too much staff, which private equity firms have a reputation for doing.
"[Alteryx] has a big installed base and private-equity ownership should ease concerns about the company's future, even if there may be short-term concerns about layoffs and continued investment in [research and development]," Henschen said. "Customers should be relieved that the company has new financial backing. But they also need to see that the new owners are investing in the company."
Eric Avidon is a senior news writer for TechTarget Editorial and a journalist with more than 25 years of experience. He covers analytics and data management.