Enterprise application programmer Serena Software said Thursday it will use $600 million in debt financing as part of its recent buyout to acquire new technologies and expand revenue.

Tech takeover giant Silver Lake spent $1.2 billion to take Serena private in November, paying a 1.5 percent premium to acquire the business software company.

The company has three potential acquisitions in its pipeline that it will pay for out of debt, using about half of the financing associated with its buyout, Serena CEO Mark Woodward said at the Red Herring Fall conference in San Francisco.

At the time of the buyout, Serena said it expected revenue of $64 million to $65 million for the quarter, which would represent as much as a 14.8 percent increase over the same period last year, when it logged revenue of $56.6 million (see Serena Software Buyout: $1.2B).

Mr. Woodward said the company would close sales of $260 million this year and planned to grow the company to $500 million within the next three years.

Many buyout shops break up their target companies and sell off the pieces. But SilverLake focuses on refinancing its companies with debt.

David Roux, an investor with SilverLake, said increased debt financing would be the biggest change for software companies over the next decade. “It is inevitable that these companies will take on more debt,” he said.

High-tech companies have traditionally avoided putting debt on their books.

“A lot of companies don’t think of debt as a way of growing companies,” said Mr. Woodward. “We just bought into the debt model in a big way.”

Debt, which must be paid back, has the potential to put a company into bankruptcy.

“If you can’t grow the company, taking debt can be dangerous,” he said. “Institutional investors don’t necessarily like debt.”

Going Private

Old-growth technology companies, such as 25-year-old Serena, are starting to consider going private and re-organizing their balance sheets.

“Why be public? There should be a lower cost of capital, but private equity is readily available,” said Alec Ellison, the managing director of Jefferies Broadview.

The fortunes of public companies can fluctuate greatly based on the opinion of financial analysts.

Some companies, such as Serena, are opting out to avoid misperceptions about their business.

“There are a lot of people who are analyzing companies and giving advice on the street that don’t really know how to value companies,” said Mr. Woodward. “The lack of weight of importance given to cash flow is astonishing to me. Or the discount for recurring revenue, how does the street not face that positively?”