I think this is more about distributions than it is about expected values. If VC and PE generate roughly the same returns to their investors (say 20% to 25% IRR), what does this mean for the companies they invest in? Fred Wilson notes (http://avc.com/2009/03/what-is-a-good-venture-return/) that with a five year average horizon, he expects roughly three buckets of outcomes:

1. 1/3 of investments go to zero, i.e. blow up and lose substantially all of investors' money.

2. 1/3 return 1.0x to 1.5x (on average across the bucket).

3. 1/3 return 7.5x (on average across the bucket).

That is wide distribution of outcomes. In PE, on the other hand, you'd get a much tighter distribution of outcomes around 2.7x returns. A single investment (much less 1/3) going to zero would destroy the fund, so PE funds want to prevent that from happening. The conclusion is that Vista is pretty sure it can get a 2.7x outcome or better, and it's also pretty sure it wont zero its investment.

So should Ping's competitors rejoice after the Vista buyout? It really depends on how quickly they're growing and how much market share they think they can win. Do they believe that either [1] Vista will fail in 2.7x-ing Ping, or [2] they can succeed even in this 2.7x world? If they believe either of these things, then the buyout is probably good news for them; if they don't, then it's probably bad news for them.