Second time lucky for Thoma Bravo, which scoops up Darktrace for $5.3B • The Register

Private equity investor Thoma Bravo has successfully completed a second acquisition attempt of UK-based cybersecurity company Darktrace in a $5.3 billion deal.

Thoma Bravo, which has an extensive portfolio of cybersecurity companies including McAfee, Proofpoint, and Sophos, originally moved for Darktrace in 2022 but the deal collapsed in the early stages.

Darktrace’s share price plummeted following the deal’s abandonment, and months later allegations of accounting fraud from a short seller ensured that the share price remained well below its all-time highs of 2021 when it was first listed in London. The fraud claims were nullified last year when auditing giant EY gave Darktrace a clean bill of health.

Since then, the company has reported steady growth, with the share price spiking in March following some strong financials. Today’s share price shot up to $7.59, the highest it has been in two-and-a-half years.

Darktrace shareholders will receive $7.75 per share as Thoma Bravo takes it private – a 44 percent increase on the average share price for the last three months.

Announcing the agreement to the markets this morning, private equity suits said they feel Darktrace remains an attractive investment to further expand Thoma Bravo’s wide exposure to the cybersecurity market, and an opportunity to accelerate the Enterprise Immune System (EIS) maker’s development.

The Cambridge-headquartered company’s financial model was described as “compelling” and “resilient.” Thoma Bravo also sees Darktrace as a leader in cybersecurity AI, pointing to its ActiveAI Security Platform and the expertise of staff.

“Darktrace is at the very cutting edge of cybersecurity technology, and we have long been admirers of its platform and capability in artificial intelligence,” said Andrew Almeida, partner at Thoma Bravo. “The pace of innovation in cybersecurity is accelerating in response to cyber threats that are simultaneously complex, global, and sophisticated.

“Darktrace is driven by a culture of innovation and we are excited by the opportunity to work alongside Darktrace’s team and accelerate its development into a scaled, global leader, further strengthening its capability and offer to customers. Thoma Bravo has been investing exclusively in software for over 20 years and we will bring to bear the full range of our platform, operational expertise, and deep experience of cybersecurity in supporting Darktrace’s growth.”

Announcing its departure from the London Stock Exchange, Darktrace said it believes its value hasn’t been reflected fairly since it was first listed in 2021, with shares trading “at a significant discount” compared to rivals.

Simon Baxter at TechMarketView said this amounted to a “lashing out” at the market, which in his view was more than merited. He pointed to Crowdstrike and Palo Alto Networks as two examples whose share prices have vastly exceeded those of Darktrace in recent times.

“I am immensely proud of our brilliant business and people,” said Poppy Gustafsson, Darktrace CEO. “From our base in Cambridge, we are building a world-leading company using a unique form of artificial intelligence to address the societal challenge of cybersecurity.

“This proposed offer represents the next stage in our growth journey and I am excited by the many opportunities we have ahead of us. Our technology has never been more relevant in a world increasingly threatened by AI-powered cyberattacks. In the face of this, we are expanding our product portfolio, entering new markets, and focused on delivering for our customers, partners, and colleagues.”

Analysts across the board highlighted how the news of Darktrace going private further weakens the negative outlook for UK tech investment. Tom Kennedy at Megabuyte said the deal “represents another nail in the coffin for the UK quoted tech sector.”

TechMarketView’s Baxter said: “So there departs another of one of the UK’s most promising publicly listed tech stocks. Tech investment prospects still look bleak for those who want to invest in the UK, with the GAMMAN companies – namely Google, Amazon, Microsoft, Meta, Apple, and Nvidia – continuing to be the primary choice for those looking to capitalize on the AI boom, with no comparable UK alternatives remotely in sight.”

We’d be remiss not to mention Darktrace’s earlier ties to Mike Lynch, the former UK tech poster boy who’s now on trial in San Francisco over allegations of accounting fraud.

The trial concerns his $11 billion sale of Autonomy, a software biz he co-founded in 1996, to Hewlett Packard Enterprise (HPE) in 2011. He’s defending allegations of inflating the value of the company before flogging it off.

Earlier this year, HPE sought $4 billion in damages from Lynch and former Autonomy CFO Sushovan Hussain. This was after the UK High Court deemed HPE to have “substantially succeeded” in its civil case against Lynch.

Lynch financially backed Darktrace from its founding days in 2013 and owns a 3.9 percent stake in the company, but doesn’t have a role in it. His wife also owns a 2.9 percent stake, meaning the family stands to receive a substantial payout of roughly $375 million from the takeover. ®