Thoma Bravo just keeps buying enterprise software companies, and there is no reason to think the private-equity firm is going to slow down.
In the latest deal, Thoma Bravo agreed to buy the spending-management company
(ticker: COUP) for $81 a share in cash, or about $8 billion, adjusting for the company’s debt and cash positions.
The Coupa bid, which is expected to close in the first half of 2023, is the latest in a string of enterprise-software transactions Thoma Bravo has completed or disclosed so far in 2022. Losses in software stocks and the firm’s ample holdings of cash to invest make more deals look likely.
Already this year, Thoma Bravo has completed the acquisitions of Ping Identity, for $2.8 billion; SailPoint, another player in identity management software, for $6.9 billion; Anaplan, a provider of business planning software, for $10.4 billion, and Bottomline Technologies, which sells software to manage business payments, for $2.6 billion. Announced but not yet closed is a $2.3 billion bid for
another player in the identity software space. The firm also has a growing venture-capital portfolio.
The equation here seems clear.
Software stocks have been clobbered since the market peak in November 2021, with the
down about 30%, and many stocks off 50% or more. This year’s spike in interest rates has weighed heavily on the software group, which had reached unusually high valuation levels late in 2021.
At the same time, Thoma Bravo has piled up a considerable war chest. Just last week, the firm said it had raised $32.4 billion in fresh capital commitments from investors, Thoma Bravo’s largest fundraising ever. Founder Orlando Bravo said in a statement that the cash infusion “will enable us to further our strategy of collaborating with management teams to build leading software companies.”
Investors can expect Thoma Bravo to continue to be an active shopper.
On the Coupa deal, terms call for a “significant minority investment” by an arm of the Abu Dhabi Investment Authority. The transaction comes at 8.4 times the consensus Wall Street forecast for sales over the next time. That is below the valuations for Thoma Bravo’s buyouts of SailPoint and Anaplan.
Coupa shares have had a difficult year. Even with a 27% spike on Monday to $78.68, the stock is off about 50% so far in 2022. The deal comes at a 78% discount to Coupa’s February 2021 peak of close to $370 a share.
The software company noted in a presentation on the deal for investors that it had talks with 14 prospective purchasers, including three strategic buyers and 11 financial firms, including six that emerged up after media reports that Coupa was in talks about a potential acquisition. Two parties issued “final and fully financed bids,” Coupa said.
Wall Street analysts who follow the company aren’t expecting any other bidders to emerge, given what appears to have been an extensive sales process by Coupa and its bankers.
In the presentation, Coupa said that fiscal 2024 revenue growth is likely to be below current Street consensus, given the challenging economic environment. Coupa said it is taking steps to boost profitability and free cash flow, including by reducing the amount it spends on staff.
Write to Eric J. Savitz at email@example.com