A strategic sale is the most likely exit route for enterprise tech company Solace after it was transferred to a single asset continuation vehicle (CV) in May, according to Alok Singh, CEO of Bridge Growth Partners (BGP).

A sale to a PE-backed strategic acquirer would be preferred to an initial public offering (IPO), Singh said.

“IPOs are not final sales,” he added. “There is a long-term hold period, and you don’t control anything.”

Ottawa, Canada-headquartered Solace provides software that enables the real-time, event-driven movement of data. Solace’s proprietary ‘event mesh’ platform securely moves event data across enterprise applications.

Singh estimates the business will be held for another three or four years, during which Solace hopes to more than double its revenue. Since BGP acquired a majority stake in Solace in 2016, the business’ annual recurring revenue (ARR) has increased by around 11 times, Singh added.

By investing in the tech stack, Solace will become more attractive to strategic buyers looking for a revenue uplift or to address product gaps. Annual recurring revenue is evenly split among Europe, Asia and North America. It works with big enterprises such as IKEA, Emirates, UAL, the US Federal Aviation Administration and similar entities abroad.

In May, BGP announced the close of a USD 790m (CAD 1.1bn) CV for Solace. The company plans to use the proceeds to build out its US sales organization. Solace also recently made its first ever tuck-in acquisition, which was not announced, and is investing in people and governance. It recently added Mike Capone, former CEO of Qlik, to its board. Qlik is a Solace customer, Singh noted.

The CV was co-led by Apogem Capital, Golub Capital, HSBC Asset Management and Schroders Capital, according to a press release. It was notably Golub’s first lead role on a CV, which is a new strategy for the firm, Singh noted. Golub is one of a swath of new entrants to the GP-led secondaries market, having announced the launch of a dedicated strategy last year.

The CV saw a higher-than-average LP rollover rate, with 25% of investors opting to roll over. Singh attributed the healthy rollover rate to investors’ conviction in the growth prospects for Solace, amid continued expansion of agentic artificial intelligence (AI). He added that the company’s growth rate is accelerating, noting that there is a need for data to be delivered instantaneously.

This comes in an environment where LPs are thirsty for distributions, amid a constrained exit market.

“A lot of firms are not getting DPI [distributions to paid-in capital] back to investors,” Singh said. “That’s creating a logjam in the market,” with 2020-2024 vintage tech funds struggling to exit.

A source familiar with the situation noted that the CV was organized to provide liquidity for investors in BGP’s Fund I and Fund II, with a significant minority of investors choosing to remain invested in Solace. These included the Healthcare of Ontario Pension Plan (HOOPP), which was an original investor in Solace and chose to roll 100% of its position, the source added, noting that HOOPP continues to hold less than 10% of the company.

BGP and affiliates rolled a significant amount of their interests into the CV, while the sponsor also made a separate, direct investment into Solace from its Fund III, representing the vehicle’s first investment, the source said. In combination, the CV and BGP’s Fund III own 86% of Solace.