Thoma Bravo, eyeing Symantec, has been on a Silicon Valley buyout spree

Silicon Valley Business Journal | By: Cromwell Schubarth | Nov. 7, 2018

One of the firm’s early bets was Sunnyvale-based Blue Coat Systems Inc., which was founded by current Symantec CEO Greg Clark, so they know each other well already. Thoma Bravo took Blue Coat private in a $1.3 billion deal in 2013 and sold it to Bain Capital in 2015 for $2.4 billion. Clark got the top job at Mountain View-based Symantec after it bought his company a year later for about $4.7 billion. This underlines a difference between venture investments and private equity deals. Firms like Thoma Bravo invest in companies with an eye to reshape them and make a profit by either reselling them or re-floating them as a public market. Private equity firms apparently think they see a lot of undervalued cybersecurity businesses this year, doing a record 87 deals in the sector already in 2018, according to PitchBook Data.

“The private equity guys are coming into cyber because it is a growth area in information technology that isn’t dominated by monopoly players in the cloud,” Ackerman said. “There’s a chance that it is still a greenfield with a tremendous amount of opportunity and it’s a rapidly growing market. “The challenge for the private equity guys is that they have to transform these businesses technologically, rather than reshape them through the financial engineering that their firms usually do. Cyber is a market that is driven by technical innovation. The technology has to be on the cutting edge.” That will probably require adding to their new portfolio companies’ product and service offerings through M&A, Ackerman said. That could mean combining Imperva and Symantec, according to Wedbush Security analysts Dan Ives and Strecker Backe.

“With Imperva recently being acquired by Thoma Bravo for $2.1 billion it would be a very logical move to seriously look at Symantec’s assets and potentially combine both assets into a broader cyber security behemoth under one hood,” they wrote on Tuesday, adding that they believe the private equity firm would need to buy Symantec for between $26 and $30 a share. That would be a premium of between 30 percent and 50 percent over Symantec’s closing price on Monday, the day before Reuters reported that Thoma Bravo had floated the idea of a buyout. That type of markup could put the price of a Symantec buyout above $20 billion. Symantec stock has jumped by between 13 percent and 14 percent since talk of a potential Thoma Bravo buyout surfaced, closing at $22.54 on Tuesday.

That is still well below the highs it was at before the company disclosed an internal accounting probe in May. Symantec put that behind it in September but its shares are still down nearly 19 percent year to date at a time that the Nasdaq Composite Index is up about 7 percent. That could make it an attractive target for Thoma Bravo or somebody else, according to the Wedbush analysts. “We continue to believe M&A activity in cyber security is poised to accelerate over the next 12 to 18 months as both strategic technology stalwarts and financial buyers look to make their bets going into a massive secular growth cycle over the coming years,” they said.

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