US private equity group Thoma Bravo is buying cyber security company SailPoint Technologies for $6.9bn, the latest in a flurry of deals that signals the leveraged buyout market is roaring back to life after a pause amid rising volatility and the war in Ukraine.
Thoma Bravo, which manages more than $100bn in assets, will pay $65.25 a share for SailPoint, or a 48 per cent premium to its volume-weighted average trading price over the past 90-days. SailPoint shares soared more than 27 per cent in pre-market trading after the Financial Times first reported the takeover.
Texas-based SailPoint is used by businesses to give employees secure access to remote working software and to protect cloud computing infrastructure from hackers.
It is the second time Thoma Bravo is investing in SailPoint. The group first bought into SailPoint in 2014 and listed it on the New York Stock Exchange three years later. It exited its holding by the end of 2018, filings show.
“This transaction delivers significant immediate cash value to our stockholders and maximises the value of their shares,” said Mark McClain, chief executive of SailPoint since he founded the company in 2005, in a press release announcing the deal.
Monday’s takeover highlights the increased interest in acquisitions among private equity buyers, particularly in the software sector, which sold off sharply at the start of the year. Thoma Bravo’s proposed purchase price is an 83 per cent premium to the lows SailPoint hit at the beginning of 2022, but it is slightly below the company’s peak reached in February 2021.
In March, Thoma Bravo agreed to the $10.7bn takeover of enterprise software company Anaplan, the first large takeover after Russia invaded Ukraine in late February.
Elliott Management has also led two large private equity-backed deals this year, taking software company Citrix private alongside Vista Equity Partners for $16.5bn in January, and buying television ratings company Nielsen for $16bn with Canadian group Brookfield late last month.
Private equity groups in the US have been able to raise billions in traditional bank financing, or from private lenders, despite rising geopolitical risks, inflation and the prospect of higher interest rates.
A consortium led by Advent International and Permira Advisers was able to close the $14bn buyout of cyber security company McAfee in early March, raising billions from bank lenders as markets fell sharply in the days after Russia invaded Ukraine.
For its takeover of Anaplan, Thoma Bravo bypassed bank lenders and instead raised financing from a group of private lenders led by Owl Rock, Blackstone, Apollo Global and Golub Capital.
SailPoint’s financing was led by Golub, Blackstone and Owl Rock, the company said in a statement.
Thoma Bravo’s takeover was approved unanimously by a special committee of SailPoint’s board of directors, and its entire board. However, SailPoint will hold a “go-shop” period expiring on May 16 to solicit a higher bid.
Private equity groups had their strongest ever start to the year in the first quarter, deploying vast cash piles accumulated during the pandemic. There were $288bn of private equity-backed deals, a 17 per cent rise compared with the first three months of 2021, according to Refinitiv data.
Bankers and lenders have also told the FT they have seen a sharp rise in private equity deal activity in recent weeks.
However, the market for private equity buyouts comes as the overall deal market slowed sharply this year. Just over $1tn of deals were struck in the first quarter, 23 per cent lower than in the same period last year.
