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October 14, 2019
Thoma Bravo, the private equity firm which has made numerous investments in technology firms over the past several years, has come forward with an offer to acquire cybersecurity giant Sophos for nearly $4 billion.
Sophos’ board of directors intends to unanimously recommend the offer to the company’s shareholders. The transaction is scheduled to close in the first quarter of 2020, according to Sophos.
Thoma Bravo has acquired more than 200 software and technology companies representing more than $50 billion of value. Among the firm’s acquisitions are Imperva, Veracode and Barracuda Networks, and a stake in McAfee.
Sophos most recently launched its managed threat response (MTR) service. It combines machine learning with analysis for improved threat hunting and detection, deeper investigation of alerts, and targeted actions to eliminate threats, the company said.
Kris Hagerman, Sophos’ CEO, tells us this is an “exciting milestone” in the ongoing journey of Sophos and an “exciting opportunity” for partners.
Sophos’ Kris Hagerman
“Thoma Bravo is a leading private equity firm and has been building and growing companies and providing equity and strategic support and working collaboratively with management teams for decades,” he said. “Thoma Bravo has deep sector expertise in technology and software companies, and particularly in cybersecurity. The firm has a long and successful track record of partnering with and investing in its portfolio companies to support long-term growth and success. At Sophos we are always innovating, and we are always evolving, and we will continue to work tirelessly to deliver advanced, highly effective and intuitive cybersecurity solutions. As Seth Boro at Thoma Bravo noted, ‘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,’ and that is clearly good for Sophos partners.”
In the weeks that Sophos has worked with the Thoma Bravo team, the management team at Sophos has been “impressed with their knowledge and experience of the cybersecurity landscape, and their operational strength,” Hagerman said.
“At Sophos we continue to execute a highly-differentiated strategy, and it’s working,” he said. “We see Thoma Bravo’s offer as a compelling validation of Sophos, its position in the industry and its progress. We look forward to working with Thoma Bravo post-completion to accelerate our evolution and leadership in next-generation cybersecurity — and to sharing this exciting journey with our partners.”
Rik Turner, principal analyst at Ovum, said the deal makes sense, particularly if Thoma Bravo hopes to “turbocharge their potential to grow in the cyber market.”
Ovum’s Rik Turner
“Usually when private equity moves in, it is because they feel a company will benefit from going private in terms of not being so tied to Wall Street and the tyranny of quarterly financials,” he said. “Sophos has been growing reasonably well (11% topline growth in year-end March 2019), but this might help them grow faster without worrying about profitability on the short term. It also might make some money available for strategic investments, specifically strategic acquisitions.”
The acquisition could give Sophos a competitive advantage if it can use it to raise their profile in the market and improve their product offering, Turner said.
“[Thoma Bravo has] bought a few security companies, and the sector Sophos is in is an interesting one, particularly on the endpoint side, in that it is already going through some consolidation, and Sophos is one of the larger players ($700 million annual revenue, compared to a lot smaller numbers [of] some of the newcomers), so it could be a good investment if they can grow the company,” he said.
Tony Massimini, senior industry analyst, information and network security at Frost and Sullivan, said Thoma Bravo is acquiring a company that’s outperforming the overall market it’s in, is well established, has brand-name recognition and a high growth rate.
“There’s no indication [Thoma Bravo] wants to break them up or combine them with somebody else,” he said.
It’s too early to say whether Sophos will benefit from the acquisition, Massimini said.
“It will be kind of interesting to see how it goes,” he said.
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