Key Takeaways

  • Progress routinely outbids private equity firms in software M&A by finding unique cost synergies that PE can't replicate.
  • Their strategy involves shifting high-cost operations (like engineering or sales) from acquired companies to Progress's existing global centers of excellence, such as their Bangalore hub.
  • This allows Progress to pay a competitive upfront price while achieving a significantly lower effective EBITDA multiple after executing on these cost efficiencies.
  • Certainty to close also plays a role: Progress's reputation for streamlined diligence and follow-through makes them a preferred buyer for sellers.

The Method

Jeremy Segal, EVP of Corporate Development at Progress, laid out how they consistently outbid private equity firms for software targets like Chef. Their secret isn't bigger wallets, but a smarter playbook rooted in unique cost synergies. “Private equity folks buying this as a standalone entity didn't have that same platform,” Segal said, referring to Progress's existing global infrastructure.

For the Chef acquisition, Progress saw an opportunity that PE firms couldn't: shift high-cost operations to their existing, lower-cost centers of excellence. Segal detailed this: “We had this center of excellence in Bangalore... a lot of the things that Chef was doing in much more expensive geographies were things that we knew we could do in lower-cost geographies and we had that platform.” This wasn't just hypothetical; they executed. Progress moved Chef's expensive engineering to Bangalore and transitioned their sales motion to an inside sales model.

This strategy allowed Progress to offer a competitive upfront price while still achieving superior financial returns. Segal explained their core goal: “How do we create shareholder value with the deals we do? We create shareholder value by finding assets where we know there's still room for optimization.” He clarified that while they might pay a higher upfront EBITDA multiple, “after we've executed on the synergies... the goal is to try to acquire assets that will be... below where we trade as an IBA multiple.” In plain English, they pay what looks like a high price on paper, but after their operational magic, the real cost is much lower.

Kison Patel, host of M&A Science, summed it up perfectly: “Jeremy won by building a model around what he could execute that they couldn't. He knew his platform well enough to see value that nobody else could price.” This "buyer-led" approach also extends to diligence. Progress is known for certainty to close. "We're not going to be asking for everything under the sun in diligence," Segal noted. “Sellers know us from a certainty to close standpoint... once we're committed to a deal in LOI stage... we're going to get a deal done.” This makes them a preferred buyer, even against slightly higher bids from less certain parties.

Where This Breaks Down

This method isn't for everyone. It relies heavily on having significant existing infrastructure, like global centers of excellence or a mature, efficient sales platform, that can absorb and optimize a target company's operations. A small startup or a first-time acquirer likely won't have these platforms ready. The strategy also assumes the target company has transferable operations with clear room for cost reduction that align with the acquirer's capabilities. It's less effective for acquisitions focused purely on novel product innovation or market entry where cost-cutting isn't the primary value driver.