Francisco Partners, a global investment firm, is acquiring publicly traded Sumo Logic for $1.7 billion, taking the company private.

Under the terms of the agreement, Sumo Logic stockholders will receive $12.05 per share in cash. This represents a premium of about 57% to Sumo Logic’s unaffected closing stock price on Jan. 20. That was the last full trading day prior to media reports regarding a possible transaction.

Francisco Partners should complete its acquisition of Sumo Logic in the second quarter subject to customary closing conditions, including approval by Sumo Logic stockholders and required regulatory approvals. Upon closing, Sumo Logic’s common stock will no longer be listed on any public market.

Next Phase of Sumo Logic’s Journey

Sumo Logic’s Ramin Sayar

Ramin Sayar is Sumo Logic‘s CEO. He said Sumo Logic has created a trusted, cloud-native, SaaS analytics platform for observability and security. It enables customers to transform complexity into insights and accelerate their cloud transformation adoption.

“Today’s announcement represents a compelling outcome for our stockholders,” he said. “We are delighted at the prospect of partnering with Francisco Partners in the next phase of Sumo Logic’s journey.”

Brian Decker is a partner at Francisco Partners.

“Sumo Logic is ideally positioned to capitalize on the large and growing demand from enterprises for observability and security solutions,” he said. “Its leading, cloud-native analytics platform provides the scalability and insights required as applications and data proliferate in today’s digital world. We look forward to partnering with Sumo Logic to drive accelerated growth and continue its long heritage of product innovation.”

Likely Positive Outcome for Sumo Logic

Omdia’s Eric Parizo

Eric Parizo is managing principal analyst at Omdia, which shares a parent company with Channel Futures (Informa). He’s not surprised by the acquisition as Sumo Logic was rumored to be up for sale for some time.

“The acquisition should result in a positive outcome for Sumo Logic,” he said. “The company has been one of the fastest-growing vendors in the could-native next-generation security information and event management (SIEM) market, with well over 2,000 customers.”

In general, SIEM vendors have been working diligently over the last 18 months to transition their traditionally on-premises SIEM solutions into cloud-based SaaS-style offerings, Parizo said. They’re doing so to take advantage of the performance and economies of scale the cloud provides.

In addition to its cloud-native platform, Sumo Logic is particularly well-positioned in NG-SIEM, he said. That’s because of its architectural simplicity. It includes features like dynamic auto-scaling to efficiently use processing power as data ingestion increases or decreases, as well as its data storage architecture that emphasizes a large amount of ‘hot’ or readily available data.

“What sets Sumo Logic apart from most other NG-SIEM competitors is its strong focus on not only security, but also observability, tracking and measuring systems status based on key indicators, Parizo said. “This security/observability combination has long been the hallmark of data analytics titan Splunk.”

However, users often see Splunk as a complex solution to deploy and use, he said. In addition, its transition to a fully cloud-native platform is ongoing.

Being Public Was a ‘Hinderance’

Sumo Logic sees an opportunity to position itself as a simpler, better performing and more cost-effective alternative to Splunk, Parizo said. However, its status as a public company was a hinderance. It’s focus on quarterly results to a degree hindered its ability to focus on investing in its technology. With new private equity ownership, Sumo Logic can now fully shift its focus to realize its long-term potential.

“The only potential challenge I see is that Francisco Partners has a mediocre track record thus far when it comes to its cybersecurity acquisitions,” he said. “In recent years, the private equity firm has acquired or invested in several cyber vendors, including Forcepoint, SonicWall and others. But those vendors have made few notable gains post-acquisition. Hopefully that trend changes with Sumo Logic, as it has as much long-term potential as any cyber acquisition Francisco Partners has made thus far.”

Rik Turner is a senior principal analyst also with Omdia. He said going private may be a smart move for listed companies, or at least ones in sectors other than AI. In Sumo Logic’s case, the SIEM space is a crowded one.

“Growing your market share in this busy threat detection and incident response (TDIR) market is a tough ask,” he said. “So maybe being taken under Francisco Partners’ wing right now makes sense, particularly if Sumo needs to invest in, say, M&A activity to expand their portfolio, or simply to face the headwinds in the market.”