Thoma Bravo acquires Sophos for $3.8bn

January 2020 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

January 2020 Issue

Private equity firm Thoma Bravo is to acquire cyber security firm Sophos for around $3.8bn.

The deal, which is expected to close in the first quarter of 2020, pending shareholder approval and a number of closing conditions, will see Sophos shareholders receive $7.40 per share in cash, a 37 percent premium over the company’s share price on Friday 11 October, the last day of trading before the deal was announced.

Once the deal has completed, Sophos will be owned by newly-formed Thoma Bravo special purpose vehicle Surf Buyer Ltd. The two companies first began discussing a potential deal in June. Sophos’ directors, including the company’s founders, Jan Hruska and Peter Lammer, have unanimously recommended that Sophos’ shareholders vote in favour of the deal.

“We are excited by the opportunity to partner with the Sophos management team and employees as we further develop Sophos as a best-in-class software franchise and nextgen security leader,” said Seth Boro, a managing partner at Thoma Bravo. “The Acquisition fits with our strategy of investing in and growing software and technology businesses globally. The global cybersecurity market is evolving rapidly, driven by significant technological innovation, as cyber threats to business increase in scope and complexity. Sophos has a market-leading product portfolio, and we believe that by applying Thoma Bravo’s expertise, operational framework and experience, we can support the business and accelerate its evolution and growth.”

“Today marks an exciting milestone in the ongoing journey of Sophos,” said Kris Hagerman, chief executive of Sophos. “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.”

Sophos, which is based in Abingdon in Oxford in the UK, employs around 3300 employees around the world and claims to have more than 400,000 clients in 150 countries. The company floated at 225p in June 2015, valuing it at just over £1bn, in one of the biggest technology IPOs in the UK that year. It was its third attempt at going public.

Thoma Bravo is a leading private equity firm focused on the software and technology-enabled services sector with more than $35bn in investor commitments. Over its 40-year history, Thoma Bravo has acquired more than 200 software and technology companies representing more than $50bn of value. The firm made its first acquisition in the technology space in 2004 when it acquired access and integration software maker Attachmate. The Sophos deal marks the firm’s first acquisition outside the US.

In late 2018, the firm bought Imperva for $2.1bn and paid Broadcom $950m for cyber security firm Veracode. Indeed, Sophos will be the 10th cyber security or identity and access management company to join Thoma Bravo in the last three years. The firm’s renewed interest in the cyber security space began with the 2017 acquisition of McAfee. Currently, Thoma Bravo’s software portfolio includes 35 firms that generate in excess of $10bn in annual revenue.

In its last financial year, Sophos posted revenues of $710.6m, with subscription revenues weighing in at $593.9m. The Europe, Middle East and Africa (EMEA) region remains its biggest market at $363.6m, accounting for just over half of its revenues, following the Americas at $253.3m. The company posted full-year pre-tax profits of $53.6m to the end of March 2019.

J.P. Morgan Cazenove, Lazard and UBS AG London Branch are acting as Sophos’ financial advisers while Goldman Sachs is advising Thoma Bravo.

Richard Summerfield