Cybersecurity giant Darktrace, a British company specializing in AI-powered threat detection, has accepted a $5.32 billion offer from US private equity firm Thoma Brava that would strip the company of its value .
Darktrace President Gordon Hurst suggested in a statement that Thoma Bravo’s most recent offer was too good to pass up. “The proposed offer represents an attractive premium and opportunity for shareholders to receive the certainty of cash consideration at the fair value of their shares,” he said. “The proposed acquisition will give Darktrace access to a strong financial partner in Thoma Bravo, with deep expertise in the software sector.”
This isn’t the first time Thoma Bravo has dabbled in the UK’s cybersecurity pool. In 2020, the company acquired antivirus software maker Sophos for $3.9 billion. Prior to the acquisition, the company said its cybersecurity portfolio, which includes leading companies such as Barracuda, McAfee, ConnectWise and more, had grown to $45 billion. Darktrace has a global customer base of over 9,400 people.
“Darktrace is at the forefront of cybersecurity technology, and we have long admired its platform and artificial intelligence capabilities,” Thoma Bravo partner Andrew Almeida said in a statement. “The pace of cybersecurity innovation is accelerating in response to cyber threats that are complex, global and sophisticated. »
Thoma Bravo’s offer represented a 20% premium to Darktrace’s closing share price last week. That gap narrowed as Darktrace shares surged with the acquisition announcement. Shares of the company, founded in 2013, have doubled over the past year and were trading at $7.58 as of Monday afternoon.
The appeal of AI for cybersecurity
“In terms of artificial intelligence and deep learning, Darktrace was one of the first companies to get involved in this area,” Chris Pierson, CEO of cybersecurity company BlackCloak, told InformationWeek in an interview. “They’ve done a very good job of strengthening their grip on this market. So this becomes interesting for Thoma Bravo, not only because of what Darktrace does, but also how Thoma Bravo can use its current business relationships and existing portfolio to offer complementary technology in sales cycles. It can use the current portfolio to allow Darktrace to penetrate further and take market share.
IT leaders may see changes – for better and perhaps worse – as cybersecurity companies consolidate. “There is an upside in terms of increased resources needed to improve technology and enable greater integration into products and services,” says Pierson. “A possible downside is that as a result, fees could be higher and make it more difficult to remove the technology in the future.”
Andy Watkin-Child, founding partner of British cybersecurity and risk management company Parava, said in a LinkedIn post that Thoma Bravo likely saw an opportunity to sell an undervalued company. “We suspect… (Thoma Bravo) sees opportunities to develop the brand and the products. The undervalued brand, with a little attention, turns out to be an opportunity to sell the product to a professional buyer.
Darktrace did not go smoothly. The company was the subject of a short selling campaign in January 2023, with a report from asset management firm Quintessential Capital Management accusing the company of artificially inflating customer and sales figures. A subsequent third-party review by Ernst & Young of the matter found only a “small number of errors and inconsistencies” but nothing “material” to the company’s financial statements. The EY review sent Darktrace’s stock up 26% after its publication.
The Thoma Bravo deal is subject to 75% shareholder approval, but the companies hope to finalize the transaction by the end of the year.
“Darktrace will find a good partner in Thoma Bravo,” says Pierson of BlackCloak. “I think this market is going to see a lot more consolidation in the future.”
