Apax to take consultancy firm Thoughtworks private in $1.75bn deal

October 2024 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2024 Issue

British private equity firm Apax Partners has agreed to acquire Thoughtworks in a deal worth $1.75bn.

Under the terms of the deal, Apax will purchase all the outstanding shares of the technology consultancy firm’s common stock that it does not already own for $4.40 per share. The offer by funds affiliated with Apax represents a premium of about 30 percent to the last closing price of Thoughtworks stock before the acquisition was announced.

The deal is expected to close in the fourth quarter of 2024, subject to customary closing conditions and shareholder approval. Once the transaction has closed, Thoughtworks will delist from the NASDAQ and become a privately held company.

Thoughtworks, which went public in September 2021, has seen its stock value plummet by 87 percent since the beginning of 2022. The consultancy’s second quarter 2024 results marked a 12.4 percent drop in revenue compared to the year prior, at $251.7m. However, it was slightly ahead of analysts’ estimates of $251.3m, according to LSEG data. Thoughtworks’ gross profit was down 23 percent year over year to $70m in Q2 2024. The company has approximately $48m in cash and cash equivalents as of June, along with total outstanding debt of $292m.

The deal came after Thoughtworks said its board had expanded its previously announced restructuring plans to capture additional savings of between $85m and $95m to target total savings of $185m to $210m. The company had announced that its restructuring plans would be completed by the end of October. The additional cost reduction efforts would impact about 6-7 percent of the company’s global workforce, it added. This roughly translates to around 630 to 735 employees based on the more than 10,500 headcount disclosed in Thoughtworks’ 2023 annual report. In June, the company’s longtime chief executive, Guo Xiao, stepped down from his role as director and chief executive.

“We appreciate the Special Committee’s comprehensive evaluation of the Apax Funds’ offer and are confident that this transaction provides immediate and fair value to Thoughtworks minority stockholders,” said Mike Sutcliff, chief executive of Thoughtworks. “Apax has been a longstanding strategic partner for Thoughtworks. With their continued support, we plan to make the necessary long-term investments and advance our vision of being a stronger, strategic partner for our clients.”

“For 30 years, Thoughtworks has created an extraordinary impact on the world through its culture and technology excellence,” said Salim Nathoo, a partner at Apax and non-executive director of Thoughtworks. “We look forward to continuing our partnership with the company in its next chapter of growth.”

“We are deeply committed to Thoughtworks’ unique culture, its unwavering focus on technological excellence, and its mission of transforming the world through technology,” said Rohan Haldea, a partner at Apax and non-executive director of Thoughtworks. “We believe that it is in the interest of all stakeholders for the Company to return to private ownership to allow the organization to re-focus on growth.”

Thoughtworks was founded in 1993 and has 48 offices in 19 countries. The firm works with clients in a wide range of industries on areas including software engineering, IT modernisation, customer experience, cloud, data and artificial intelligence (AI). Despite its recent struggles, Thoughtworks did see a strong demand for AI and data services in the first half of 2024, contracting with 49 new clients and forecasting quarter-over-quarter growth in Q2.

Thoughtworks, which is based in Chicago, is a premier partner for both AWS and Google Cloud, while it also partners with Microsoft and Databricks, among others. In 2023, the company acquired all-star AWS partner Itoc to boost its AWS business in Australia. In April 2024, Thoughtworks also acquired AI model specialist Watchful to boost its AI capabilities.

Apax intends to finance the transaction with fully committed equity financing and added that the deal is not subject to any financing condition.

Richard Summerfield