Thoma Bravo to acquire British vendor, expand security portfolio, make investments ahead of economic downturn
Score another security vendor for firm Thomas Bravo. The San Francisco-based private equity firm is buying the British company for $3.8 billion to expand its security portfolio. The deal is part of a rapidly shifting security landscape that’s rearranging partner relationships and go-to-market schemas.
The Lowdown: The deal comes after several months of negotiations. Thoma Bravo approached Sophos in June with a tender offer to acquire the company and remove it from the public market. After several months of consideration and no additional offers, Sophos accepted the offer.
The Details: Thoma Bravo will pay nearly $3.8 billion and assume accrued debt as part of the deal to acquire Sophos. The deal will end Sophos’ brief run on the public markets; the company’s 2015 IPO generated more than $1 billion in cash. While Sophos posted 9% growth for the past six months, its stock value is down due to previous headwinds that caused growth to slow.
The Impact: Sophos says the acquisition will not affect its go-to-market strategy or change its operations. The company plans to maintain its current product portfolio and development roadmap. Neither Sophos nor Thoma Bravo commented on potential changes in management. If previous investments are any indication, Thoma Bravo tends to leave well-working companies alone.
While Sophos anticipates no changes, partners may have different sentiments. Within hours of the acquisition announcement, Sophos partners began expressing concerns about the impact of the security vendor being owned by a U.S.-based firm and the regulatory implications — particularly making the company subject to the USA Patriot Act.
Background: Thoma Bravo is one of the largest private equity firms in the world, having invested more than $50 billion in established technology vendors. It’s also one of the most heavily invested firms in the technology and security sectors, having interests in companies including Barracuda Networks, ConnectWise, Continuum, LogRhythm, McAfee, SolarWinds, Veracode, and others.
The Buzz: “Today marks an exciting milestone in the ongoing journey of Sophos,” said Sophos CEO Kris Hagerman. “Sophos is actively driving the transition in next-generation cybersecurity solutions, leveraging advanced capabilities in cloud, machine learning, APIs, automation, managed threat response, and more. We continue to execute a highly effective and differentiated strategy, and we see this offer as a compelling validation of Sophos, its position in the industry, and its progress.”
“Thoma Bravo has deep sector expertise in cybersecurity software, as well as a long and successful record of partnering with and investing in its portfolio companies to support long-term growth and success,” said Thoma Bravo Chairman Peter Gyenes.
Channelnomics Point of View: The security segment is attracting much investment as new companies are coming to the market with innnovative products and established vendors seek new funding sources. The result is a high level of acquisitions and consolidation, highlighted by Broadcom buying Symantec’s enterprise business and private equity firms Permira and Advent International looking to buy the consumer side of Symantec. The big lure to security is the sustained growth of the segment, which remains around 9% annually while the rest of the IT market is facing a steep slowdown going into 2020.