Slowing Growth, Stagnant Stock

The cybersecurity business SailPoint Technologies announced on Monday that private equity firm Thoma Bravo will acquire it for $ 6.12B, in the latest deal that highlights the heightened interest in the security software market.

  • Thoma Bravo will enhance its power in the security-focused area by purchasing SailPoint, based in Austin, Texas, where it already has important interests in Proofpoint Inc, Barracuda Networks, and Sophos
  • According to sources, the agreement will allow SailPoint to expedite its shift to a SaaS model while avoiding the scrutiny of being a public business, as well as fund possible disruptive acquisitions with Thoma Bravo's dry powder

"In its most recent earnings report on February 28, SailPoint reported decent, but not spectacular results, which is just the kind of company that private equity firms like Thoma Bravo love. Its fourth-quarter revenue came in at $135.6 million, up 31% year over year, while total revenue was $439 million, up 20% over the prior year." by Ron Miller for TechCrunch

Increasing Risks

The COVID-19 pandemic-driven shift to remote working, as well as the Russian invasion of Ukraine, have resulted in an increase in cyberattacks. This placed cybersecurity on top of the mind of buyout firms.

  • On Monday, Datto, a security solutions business, was taken private for $ 6.2B by investors led by Insight Partners
  • Prior to its IPO in 2017, Thoma Bravo, which controls more than $ 103B in assets, was the biggest shareholder in SailPoint. By the end of 2018, it had left its position

Going Private

It's the latest in a long line of Thoma Bravo acquisitions. It comes after its $ 10.7B acquisition of Anaplan, an enterprise software company. Last year, the business paid $ 12.3B for the cybersecurity firm Proofpoint

  • The company now has 24 security-focused companies in its portfolio, including SailPoint.

"Seth Boro, managing partner at Thoma Bravo, sees a company with a great deal of potential, especially as more employees are working from home since the start of the pandemic, and companies need to ensure identity security wherever a worker happens to be." by Ron Miller for TechCrunch

BENCHMARK'S TAKE

  • Many PE firms may try to replicate Thoma Bravo’s success and buyout tech companies that have seen their valuation compress over the last months
  • PE firms might most likely be looking for firms with a strong but under appreciated product in a growing market and a valuation that has stagnated over the last 6 months

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Markus Spiske on Unsplash.