Vista Equity Laying Groundwork to Move Three San Diego Companies

12/12/13Follow @bvbigelow

Vista Equity Partners, the private equity firm that spent $2.8 billion this year acquiring San Diego’s Active Network, Websense, and Omnitracs, intends to move all three companies to Texas, according to a source in senior management who is familiar with the plans.

The relocation would be completed in 2014, affecting a total of up to 1,700 San Diego-based employees at all three companies.

“The wheels are in motion,” said the source, who would only speak anonymously about Vista Equity’s plans. “They don’t like California because of the tax structure. They like to hire young, aggressive, incredible talent on the cheap, and get them in there to drive up the earnings or cash flow. They basically take out the costs, increase the cash flow, get the debt down, and look for a sale.”

Vista Equity did not respond this week to requests for comment that were left Tuesday by phone and through the firm’s website. Vista Equity is based in San Francisco, and has offices in Chicago and Austin, TX.

In response to a request for comment, Kristin Carroll, marketing vice president for the Active Network, wrote in an e-mail late Wednesday, “As you’re aware, the acquisition by Vista is very recent and we have not finalized any of our 2014 plans.”

Omnitracs CEO John Graham declined to comment in a brief phone call, referring the query to Vista Equity. A spokeswoman for Websense did not immediately respond to a query by phone and e-mail late Wednesday.

The private equity firm specializes in software investments, and currently has about $7.7 billion invested in a portfolio that includes Atlanta-based Aderant (law practice management software), Austin, TX-based Accruent (commercial property management software), and Carrollton, GA-based Greenway Medical Technologies (IT systems for physician practices).

The first of Vista Equity’s three San Diego acquisitions this year was Websense. The $1 billion deal that was announced on May 20 and closed on June 25. The network security firm was founded in 1994 with software that enabled corporations and other customers to prevent their employees from visiting non-business-related websites. The company went public in 2000, and expanded its offerings to include a variety of technologies that protect organizations from cyber attacks, data theft, and other types of Internet security breaches. At the end of 2012, Websense had more than 1,600 employees around the world, according to its annual report, including more than 500 in San Diego.

Vista Equity’s $800 million purchase of Qualcomm’s Omnitracs division was announced on August 23, and was completed three months later. Qualcomm (NASDAQ: QCOM) introduced the satellite-based fleet management system for long-haul trucking companies in the late 1980s, and generated enough cash from the two-way communications and tracking system to sustain Qualcomm’s development of its core wireless CDMA technology. In conjunction with the deal, Vista Equity said it also was acquiring Baltimore, MD-based Roadnet Technologies for an undisclosed price, and planned to combine Roadnet’s private fleet management software with Omnitracs. The Vista Equity buyout included Omnitracs operations throughout the United States, Canada, and South America, but the number of employees was not disclosed. Qualcomm did not disclose how many employees worked in its Omnitracs division. One estimate has the headcount at about 475 in San Diego.

Vista’s $1 billion buyout of the Active Network closed on Nov. 15, less than two months after it was announced. The Active Network, founded in 1999, provides Web-based online registration services for more than 55,000 global customers, including marathons, recreational sports leagues, campsite reservations, hunting and fishing licenses, and company conferences, meetings, and retreats. The company went public in 2011. At the end of 2012, the Active Network had more than 3,000 employees around the world, according to its annual report, including more than 700 at its San Diego headquarters.

So far, there is no external indication of Vista Equity’s plans. All three San Diego companies continue to list San Diego job openings on their respective websites, and commercial real estate executives said they were unaware that Vista Equity was laying the groundwork for a move.

“I really hope that it’s not true, because it really would be a shame for those core software capabilities to leave San Diego,” said Jeb Spencer of TVC Capital, a San Diego private equity firm that specializes in software deals.

Nevertheless, such a move makes sense, Spencer said.

“The resources here are beyond expensive,” Spencer said. “We know the tax structure [in California] is unfavorable to business and individuals, and I imagine their margins would improve 10 percent by making the move.” In Texas, Spencer added, “The rent is less, taxes are less, and I’ll bet salaries would be 30 percent less expensive there.” (Texas has no individual or corporate income tax; corporate income tax rates in California vary from 1.5 percent to 10.84 percent, depending on the type of corporation.)

Jeff Lunsford, a longtime San Diego software executive who is now CEO at Tealium, a San Diego startup that provides a Web platform for managing Javascript tags, said he doesn’t see it that way. “We clearly believe San Diego and California are great markets for building high-tech, high-growth startups,” Lunsford said. “We’re certainly growing here and we’re able to find great people here.

“I don’t want to say anything about Texas,” Lunsford added. “It is a great market, and it does have a great tax structure. But I’m not sure it makes that much difference when you have a high-tech, high-growth startup, because they’re not making money anyway.”

David Marino, executive vice president of the San Diego commercial real estate company Hughes Marino, said the departure of three well-established software companies would be “unfortunate, but it wouldn’t be catastrophic” for the commercial real estate market here.

“I have been hearing a lot of concern from employers these days about the difficulty in hiring smart, hard-working people,” Marino said. “We’ve got a number of companies that are looking to hire 100 or more people next year, and they’re kind of scratching their heads in terms of where they’re going to find them. This would certainly put a lot of those high-quality employees back on the market.”

Spencer also noted the departure of three of San Diego’s biggest software companies could have a huge impact on the ecosystem for software startups in San Diego. That would depend, though, on the number of senior engineers and executives who decide they would rather stay in San Diego than move to Texas.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • http://embarke.com/ ALBsharah

    That’ll be a huge shame if they clear out these great companies from our ecosystem. The positive is that there will be great opportunities for new employees, but that’s a very short-term view of the situation. The startup community in San Diego can only continue to thrive if successful companies continue to grow here and actively give back to that ecosystem. I really hope this doesn’t happen.

  • KristinJ89

    bastards

  • EngineUSA

    Vista has already started replacing San Diego, Cali jobs with cheap China labor, so the move to Texas is just icing on top of it all. This another good example of why the US economy will continue to deteriorate; white collar and technical jobs are being exported.

  • empirenine

    I worked at Active for 5 years and know a lot of talented people that still work there today. So while its an undesirable roadmap for Active, the upside is that there will be an injection of tech talent in San Diego in the near future.

  • RC

    this is hearsay. wait till things pan out.

  • Concerned Employee

    I am curious to hear Vista’s response to this. Then again we will never get a straight story until it happens.

  • Former Websense employee

    Oh Websense is moving, the CEO told the entire company during the last all hands a few weeks ago along with a huge picture of Austin in the background and all the “great ” companies that call Austin home. Furthermore they already have the building, it is 10 minutes from Austin next to a big man made lake in a corporate park…Google Earth not hard to spot with just that info.

  • swalsh55

    I wrote code at Active until 2012 and honestly the acquisition spree they went on after going public put them in a huge technical hole they still haven’t climbed out of. A local startup with clean apps could certainly make a decent run at displacing them in the San Diego area by taking advantage of local relationships and the far higher flexibility of a smaller company.

    Just don’t lease the most expensive office space in SD (La Jolla & then the top of the hill in Sorrento Valley, seriously guys?), and then grow from there. Just don’t sell out and go public to avoid a repeat performance. I think most people would be boggled at how easy it really is to do what most of these companies do.

  • http://www.startupsandiego.co/ Eric Otterson

    I agree with Al on the employee front, those startups and fast growing companies in San Diego seeking talented tech and middle management may have a mini-gold rush soon enough….

  • Current Websense Employee

    Hopefully yesterday’s board meeting produced some answers that will soon be communicated to us.

  • James

    Stay classy San Diego…

  • Worried

    Websense layoffs are starting.

    • worried as well

      how many people are being let go? any idea?

    • Didi

      Keep us up to date because I work for Active Network and I’m very concerned that they will be laying us off in October…

      • Christo

        Yes current employee would like to know…. but the transparency management speaks of at Active is 0% visibility. Any news of the Texas move in 2014? Is this 100%?

  • Am I next?

    Websense is paying people off today.

    • Didi

      How many people are they laying off? Any idea??

    • severance?

      Are the people getting laid off getting severance?

    • Christo

      When is the Websense move to TX to be finalized?

  • Current Active employee

    We’ll have a all staff meeting with the CEO next week. Hopefully we will have a better picture of what is going on. I don’t want to move to Texas. Has anyone seen the Websense or Active building in Austin?

  • StuTheDog

    I’m also an Active employee and can attest that we have a ton of top heavy administrators, we can lose 1/2 of them tmro without missing a beat. I like this move, gonna be an interesting year.

  • GKSanDiego

    I won’t be buying anything from those companies including Websense who I’ve purchased from in the past. Moving to TX will kill the innovation all have brought to the market.

    Beyond that, Vista Equity is simply going to pump up their book value, load them up with debt, dump the companies and people and move on to their next corporate victims.

  • Employee
  • exactive

    Well they did get rid of the CFO of Active a few weeks ago with no warning.

  • Employee
  • Employee2

    In a preliminary report, Websense projected it would hire 23 executives – 50 percent local hires – at an average wage of $250,000. The company is also eyeing 48 mangers at $150,000 annually with 75 percent hired locally, 92 supervisors at $95,000 annually with 80 percent hired locally, 123 staff at $70,000 annually with 80 percent hired locally and 184 entry level workers at $45,000 with 85 percent hired locally. http://www.bizjournals.com/austin/blog/at-the-watercooler/2014/02/behind-the-scenes-how-websenses-proposed-austin.html

  • Current Active member

    First round of layoff at Active started yesterday. A 100 positions elimitated. For most of the positions elimated a new position opens at Texas.

    • Guest

      Are they laying off management or lower positions?

      • Guest

        Both!

  • http://adboomgrp.com Nicole

    We’re hiring ! Talented designers, developers, software engineers, finance executives…adboomgrp.com! check us out

  • rocker

    I interviewed last year at Active and did really well. I am glad I did not take that position. I moved from Texas to be in San Diego and now this happens. Phew!!! sometimes things happen for a reason. Some really smart people there , so I do feel sorry for them. If they do decide to move then they will looking for new jobs in Texas within a year. Beware of Texas …its just different and yes enjoy the summer its lovely ;-)