US Private Equity Giant Strikes Deal After Previous Takeover Talks
In a significant move, the renowned US private equity firm Thoma Bravo has reached an agreement to take Darktrace, a prominent UK-based cybersecurity company, private in a transaction valuing the business at a staggering £4.3 billion. This acquisition bid comes less than two years after Thoma Bravo held preliminary talks about potentially purchasing the artificial intelligence-driven cybersecurity firm.
The offered price of 620 pence per share represents a substantial 20 percent premium over Darktrace’s closing share price on Thursday. Consequently, the company’s shares soared by 19 percent in early trading on the London Stock Exchange on Friday. This substantial valuation stands in stark contrast to Darktrace’s initial public offering (IPO) in April 2021, when shares were priced at 250 pence each.
Darktrace’s board of directors acknowledged that it had previously reviewed and rejected unsolicited offers from Thoma Bravo, deeming them insufficient in accurately reflecting the true value of the company’s business. However, the current agreement follows discussions between the two parties regarding the possibility of taking Darktrace private, which took place during the summer of 2022 when the cybersecurity firm’s market capitalization stood at £2.7 billion.
Should the deal successfully conclude, it would mark yet another high-profile instance of a UK-listed company being acquired by an overseas private equity group. Last year witnessed a surge in such acquisitions, with notable examples including the veterinary pharmaceuticals company Dechra and the restaurant group behind the Japanese dining chain Wagamama.
The decision to go private will bring an end to a tumultuous period for Darktrace on the London stock market. Founded in 2013, the Cambridge-based company specializes in providing artificial intelligence-based cybersecurity services designed to safeguard businesses against the growing threat of cloud-based attacks – a challenge that has intensified due to the proliferation of cyber warfare.
Darktrace capitalized on the surge in investor demand for rapidly growing technology companies when it went public three years ago, with its share price tripling within the first six months of its listing. However, the company’s fortunes took a downturn later in 2021 when stockbroker Peel Hunt suggested that Darktrace’s true value might be only half of its market capitalization at the time.
In January 2023, the New York-based firm Quintessential Capital Management published a report alleging that Darktrace appeared to have simulated or anticipated sales to “phantom” customers through a “network of willing resellers.” The report further alleged that the company might have incorrectly booked sales of hardware as software and potentially misrepresented the nature of its revenue. Darktrace firmly rebutted these claims made by the short seller.
The FTSE 250-listed group has also grappled with its ties to Mike Lynch and Autonomy, the UK software company he founded, as the British tech entrepreneur faces fraud charges in the United States, to which he has pleaded not guilty. Darktrace has maintained that the trial is “not a Darktrace matter” and “relates to events which took place at Autonomy well before Darktrace was even founded.”
Lynch and his wife, Angela Bacares, collectively own around a 7 percent stake in Darktrace, according to Bloomberg data, potentially netting them nearly £300 million if the sale goes through, based on the company’s share count at the end of March.
Darktrace’s chief executive, Poppy Gustafsson, previously worked as Autonomy’s corporate controller and helped establish the cybersecurity company using funds partially provided by Lynch’s Invoke Capital.
Thoma Bravo, a renowned software investment firm with nearly $140 billion in assets under management, is acquiring Darktrace to aid its expansion into the US market, where the private equity giant owns dozens of enterprise software businesses, according to a person familiar with the matter.
“The acquisition will provide Darktrace access to a strong financial partner in Thoma Bravo with deep sector and US markets expertise who can support Darktrace’s growth,” the Darktrace board stated in a statement.
Founded over 40 years ago, Thoma Bravo has been actively expanding its presence in Europe, announcing in 2022 that it would open an office in London. Earlier this year, the investment firm completed a deal to acquire EQS Group, a German compliance software company, further solidifying its foothold in the region.
