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TPG Makes Big Software Play With Acquisition, Planned $500M Investment in CollabNet

TPG Capital is making its latest move in the realm of software by acquiring dev-ops firm CollabNet VersionOne from fellow private equity firm Vector Capital, Fortune has learned.

While financial terms of the transaction were not disclosed, TPG is acquiring a majority stake in CollabNet and plans to invest up to $500 million of capital into making it a flagship, integrated dev-ops platform catering to companies' software needs.

“We’re a strong believer that over the next 10-plus years, through digital transformation, what were historically non-tech companies are all going to become software companies in some shape for form,” TPG partner Nehal Raj told Fortune. “Everyone needs to do that in order to be competitive, and these companies need software that enables them to write and manage code in a more modern way.”

But the market currently serving such needs is an “extremely fragmented” one, according to Raj, with companies forced to deal with myriad vendors when it comes to an array of software solutions. Raj noted that the private equity firm spent “the last 24 to 36 months” surveying opportunities in the dev-ops market and found an industry ripe for consolidation.

To that end, TPG has earmarked half a billion dollars toward transforming Alpharetta, Ga.-based CollabNet into a one-stop provider for enterprise clients’ software development initiatives—an “end-to-end platform” that would provide an alternative to buying various pieces of software from different vendors, Raj said. 

Much of that growth will come through acquisitions of other software firms that complement CollabNet’s offerings. Though Raj helms TPG’s software and enterprise technology investments, the CollabNet deal is being made through the private equity firm’s $14 billion flagship buyout fund—which he noted gives TPG ample equity with which to pursue its designs dev-ops consolidation strategy. “What’s critical for us is using this as an acquisition platform, and acquiring interesting companies and adding them onto the existing solutions that are already here,” he said.

For CollabNet, TPG’s backing providers an opportunity to take the company’s scale and reach “to another level,” CEO Flint Brenton told Fortune. Brenton described his firm’s partnership with Vector Capital—which acquired CollabNet in January 2014 in a deal that valued the company at $36 million, according to PitchBook data—as a “very successful” one.

But he added that he’s been “looking for the right partner for some time” to help grow the 20-year-old company beyond its current scope of 1,200 enterprise customers located mostly in the U.S. and Europe. “We think it’s a very good match, and our opportunity to scale has gone up dramatically with this partnership,” Brenton said.

In a statement, Vector Capital managing director Rob Amen said the private equity firm “successfully transformed CollabNet from a point provider of developer tools to a leading enterprise-grade dev-ops platform.”

“We are proud of the outcome we achieved for our investors and wish the [CollabNet] management team and TPG continued success during the company's next chapter,” he added.

This story has been updated to include comment from Vector Capital.

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