Bridge Growth Partners has acquired only five enterprise technology companies since it was founded in 2013 and has just one left to exit. The New York-based sponsor’s outlier model is built around a small, concentrated portfolio and the application of its operational expertise on each investment.

“We like to keep it pretty focused so that we can apply the energy and the quality of our talent on those companies,” co-founder, CEO and CIO Alok Singh told Mergermarket.

Singh described Bridge Growth Partners as a business of artisans, as opposed to firms that seek a large number of companies to reduce concentration risk and increase assets under management (AUM).

“That’s a different business,” he said.

This highly focused approach relies on a robust track record in the tech sector. Singh himself is a veteran of New Mountain Capital, where he was a managing director from 2002 to 2013. Co-founder and Chairman Joe Tucci was the chairman and CEO of data storage giant EMC Corp, until its sale to Dell in 2016 for USD 67bn, as well as serving as chairman of VMWare and Wang Labs.

The sponsor aims to make growth-oriented investments in established middle-market companies and turn them into strategically relevant assets. “We look for enterprise plays, generally,” said Singh.

In all, Bridge Growth Partners has deployed nearly USD 1bn, inclusive of capital from co-investors, from its first two funds, he said.

The sponsor closed its first fund in October 2016, on USD 410m. All five platform buys were made from Fund I.

It filed for its second fund in 2021, with no size disclosed. Bridge Growth Partners used it as a top-up fund to add to its stakes in three of its existing portfolio companies rather than seek new investments amid soaring valuations at the peak of the post-pandemic M&A market.

“You have a choice: you can buy a new asset and potentially overpay for it and take on all the risks of a new asset, or you can put more money into your existing companies, which you know really well,” said Singh.

Co-investment, meanwhile, plays a significant role in the sponsor’s approach.

“In today’s market, co-investors offer funds substantial additional flexibility, so if they need additional capital all they need to do is talk to their investors and they will likely be able to get that additional capital in the form of a co-investment,” he said.

New vintage looming

Singh described the current environment for acquiring application software and infrastructure technology businesses as the best he has seen in many years.

Singh attributes these favorable conditions to the decline in valuations since the M&A market peak. In a buyer’s market, Bridge Growth Partners is likely to grow its portfolio in size beyond five companies.

“We’re not encumbered by legacy portfolios where we have any issues or anything like that, and we have the right kind of resource set in terms of the talent around the table to be able to pursue those opportunities,” he said.

Areas the sponsor is focusing on include data analytics, business intelligence tools for CFOs, software for insurance and government applications and supply chain logistics.

Education is also a core area of focus. “We have a deep level of expertise in that vertical,” said Singh.

In terms of infrastructure, the sponsor is looking at middleware and possibly software-enabled services, though it will tread carefully in the latter field as it assesses the impact of AI on services businesses.

While it has done larger deals, Bridge Growth Partners typically looks to invest USD 100m to USD 200m in equity and prefers to be over-equitized rather than over-leveraged. “There are plenty of people who think that six- or seven-times leverage is fine; I personally don’t,” said Singh.

The sponsor typically is a majority investor, often holding over 80% of the equity, but not always. Its stake in government services firm Salient CRGT – exited in 2021 – hovered at approximately 50%, for instance.

Hands-on experts

Bridge Growth Partners’ model relies heavily on the application of extensive industry experience. Singh and co-founder Tucci are among a leadership team with deep experience as investors and operators.

Among others, executive partner Don Callahan is a former CAO and global head of operations and technology at Citigroup [NYSE:C]. Executive partner Steve Mills, worked as executive vice president in charge of software and systems at IBM [NYSE:IBM], effectively running a USD 20bn business, Singh noted.

“Our advisors work with us on the diligence of these companies and then if we decide to make the investment, they actually end up on the boards of the companies,” he said.

The sponsor’s experts typically occupy key roles, such as chairing technology or strategy committees.

Improving each business begins with ensuring it has the right leadership team and talent in place. This is often followed by strategic M&A to enhance capabilities, and the leveraging of relationships with large enterprises to support the sales activities of portfolio companies. “A big part of what we do is about go-to-market,” Singh said.

Bridge Growth Partners in August 2017 acquired a majority stake in Syniti, previously known as BackOffice Associates, a Needham, Massachusetts-based global vendor of enterprise data management software and services.

It effectively transformed Syniti from a perpetual license software company into a cloud-based business.

In addition to rebranding in 2019, the owners installed a whole new management team, including the appointment of former Accenture [NYSE:ACN] CEO Bill Green as chairman of the board.

Bridge Growth Partners’ Tucci also joined the board, while Mills became chair of the company’s technology committee.

Already operating in the SAP [NYSE:SAP] ecosystem, Syniti set out to deepen its product partnership with the enterprise resource planning software giant, as well as develop new alliances with firms like Deloitte, IBM, Accenture and Capgemini.

Syniti helps customers like Merck [NYSE:MRK] and Johnson & Johnson [NYSE:JNJ] to migrate from SAP’s legacy technology to its latest ERP platform, which is typically multi-year projects, Singh explained.

The firm made several add-on acquisitions and grew its headcount from about 800 to more than 1,200 while transitioning from on-premise perpetual license sales to a software-as-a-service model.

Strategic exits

The transformed companies have proven attractive to suitors. In August, Capgemini [EPA:CAP], a French provider of IT, consulting and professional services, announced a definitive agreement to acquire Syniti for undisclosed terms.

“It was Capgemini who approached us and said ‘we want to buy this company,’ a few months ago, and now we’re in the final stages of that,” Singh said, adding that the buyer intends to keep the existing management team.

After making additional investments in the company from its second fund, the sponsor owns about 80% of Syniti, he added.

Previous exits include the sale of Canada-based performance analytics and end-user experience solutions provider Accedian to Cisco [NASDAQ:CSCO], announced in June 2023, for undisclosed terms.

In December 2021, Veritas Capital announced a deal to buy  Glastonbury, Connecticut-based school website and digital communications tools provider Finalsite from Bridge Growth Partners for undisclosed terms.

Months earlier, Welsh, Carson, Anderson & Stowe-backed GovernmentCIO announced in July 2021, a deal to acquire Salient CRGT from Bridge Growth Partners and Frontenac.

The last remaining portfolio company, Solace Corp, an Ottawa, Canada-based maker of hardware and software message routers, is growing nicely toward an eventual exit, Singh said.

Bridge Growth Partners favors traditional exits and would be unlikely to consider a continuation fund for any of its assets.

“Our view is that what we do should be done, end-to-end, effectively between four to six or seven years,” Singh said.