Thoma Bravo strikes $6.4bn software deal

October 2021 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2021 Issue

Software investment firm Thoma Bravo has agreed to acquire Medallia, Inc. in an all-cash deal that values the company at $6.4bn.

The transaction is expected to close in 2021, subject to customary closing conditions, including approval by Medallia shareholders and receipt of regulatory approvals. The deal does include a 40-day ‘go-shop’ period during which Medallia can consider alternative deals.

Under the terms of the agreement, Medallia shareholders will receive $34 per share in cash, which represents a premium of approximately 20 percent to Medallia’s unaffected closing stock price on 10 June 2021, the last full trading day prior to media reports regarding a possible transaction, and a premium of approximately 29 percent to Medallia’s unaffected 30-day average price.

Medallia is a customer survey software provider that uses artificial intelligence to create predictive insights for businesses. The company went public two years ago. Thoma Bravo is one of the largest software-focused private equity firms with more than $78bn in assets under management.

“Today’s announcement underscores our commitment to constant innovation, expansion and value creation,” said Leslie Stretch, president and chief executive of Medallia. “Since becoming a public company in 2019, we have made significant progress bolstering our leadership position in experience management. Today, Medallia benefits from a differentiated portfolio of cloud technology solutions and an expansive, loyal customer base across a diverse set of industry verticals and geographies.

“I look forward to our continued outstanding work in support of our customers,” he continued. “Furthermore, we are eager to build on our success and begin the next phase of differentiated growth, and we believe that becoming a private company represents the best opportunity to do just that. In addition to maximizing value for our shareholders, this transaction will enable us to execute on our long-term strategy with even greater effectiveness, efficiency and flexibility.”

“Medallia has positioned itself at the forefront of the experience management market with a best-in-class SaaS platform that leverages proprietary AI to help companies better understand their customers and employees and drive meaningful business growth at scale,” said Scott Crabill, a managing partner at Thoma Bravo. “Medallia’s ability to provide personalized and predictive insights across every channel and to companies of all sizes has become mission-critical in a rapidly expanding universe of structured and unstructured data, where more and more business is transacted digitally.

“We look forward to partnering with Leslie and the talented Medallia team and applying our operational and investment expertise in software to support the company in the next phase of its growth journey,” he added.

“Medallia not only created the category of experience management but continues to redefine it through innovation, having built a unified, action-oriented platform with the most comprehensive signal capture technology on the market,” said Peter Stefanski, a principal at Thoma Bravo. “Medallia products are used extensively from the front line to the C-suite in enabling users to improve experiences in real-time with valuable data and insights. In a world where enterprises are only beginning to understand the power of using experience data to run their businesses, we are excited to support Medallia as it continues to capitalize on a massive, growing market opportunity.”

Blackstone Credit, along with some funds managed by Apollo Capital Management and KKR Credit, will provide debt financing for the deal in the form of a $1.8bn loan in the latest in a series of giant-sized deals in the direct-lending market.

Unitranche lending has been surging of late, becoming one of the hottest parts of the direct-lending market. Deal volume jumped to $21.6bn in the second quarter of 2021, compared with roughly $3bn during the same period five years ago, according to Refinitiv. The Medallia deal put the debt component of the purchase price at less than 30 percent of the value of the company.

Richard Summerfield