Mergermarket Speaks with Leonardo247 on RealPage Buyout Views

Leonardo247 views RealPage buyout as harbinger of proptech boom.

Leonardo247 views RealPage buyout as harbinger of proptech boom

LOS ANGELES — Troy Hooper of Mergermarket

Leonardo247, a real estate management software company, views Thoma Bravo’s buyout of RealPage (NASDAQ:RP) for USD 10.9bn as a sign of things to come, said founder and CEO Daniel Cunningham.

The purchase price, which represents a 36.5% premium over RealPage’s volume-weighted average cost in the 30 days leading up to the 18 December deal announcement, is recognition the real estate industry is ready to adopt technology at scale, Cunningham said. The executive said he believes more consolidation is likely in the real estate technology sector, along with escalating valuations.

Thoma Bravo’s acquisition of RealPage is expected to close in the second quarter of this year.

While RealPage provides feature-rich back-office accounting software for property management, Redondo Beach, California-based Leonardo247 offers similar tools for operations and maintenance.

“We want to become the other must-have operating system in real estate,” Cunningham said.

Founded in 2014, Leonardo247 was bootstrapped up until about four months ago when it accepted its first institutional investment of USD 9.5m from New York-based private equity firm Level Equity.

It plans to deploy the fresh capital on marketing, and an expansion of its sales force.

Already, the company has seen its revenues double each year for the past few years, Cunningham said.

Its software is deployed in every US state other than North Dakota, and it recently entered the UK market, he said. The company plans to enter France, the Netherlands, and Spain by the end of 2Q22.

Leonardo247 may hire consultants in those overseas markets to help build a sales team knowledgeable of foreign customs and ways of doing business, he said. Using consultants is a fiscally responsible way for the company to outsource part-time roles, he added, noting that it currently employs a “fractional CFO.”

Since Leonardo247 operations are currently breakeven, it does not anticipate raising more institutional capital unless it decides to make acquisitions. The company is not actively looking for acquisitions as it does not see any gaping holes in its existing set of features, but it will be opportunistic, the CEO said.

“Our feature set is pretty mature, so our growth plan is not predicated on acquiring point solutions,” Cunningham said. “It is about growing our existing platform to a larger customer base.”

The executive declined to disclose Leonardo247’s financials. But he said it is “clearly the market leader” in its category, and bigger than a typical Series A tech startup. He said it is the size of a Series B firm.

The company’s name is inspired by Italian polymath Leonardo da Vinci, as it aims to modernize property management with automated solutions available to customers 24 hours a day, seven days a week.

In addition to RealPage, Leonardo247 considers Goleta, California-based Appfolio (NASDAQ:APPF); Santa Barbara, California-based Yardi Systems; Lehi, Utah-based Entrata; Cleveland-based MRI Software; and other automation companies in tangential industries as comparable companies, Cunningham said.

Leonardo247’s goal is to build a platform that can stand on its own but given the rapid adoption of real estate technology driven by the COVID-19 pandemic, he acknowledged it could become an M&A target.

An initial public offering could also be in its distant future, but Cunningham said he would rebuff approaches from special purposes acquisition companies as he does not “think they breed great companies.”

Leonardo247 needs time to reach its potential, he said, and then it “will have all kinds of exit options.”

Cooley provides legal advice to the company.

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