The software private equity behemoth, Thoma Bravo, is set to acquire Coupa Software (NASDAQ: COUP) in an all-cash transaction valuing the company at $8 billion.
According to the press release, Coupa shareholders will receive $81.00 per share in cash, representing 77% to Coupa's closing stock price on November 22. The transaction received unanimous approval by the Coupa Board of Directors and is expected to close in first half of 2023. It was said that Coupa was also in late stage talks with Thoma Bravo's competitor, Vista Equity Partners. However, Thoma Bravo came in with a higher price, ultimately sealing the deal.
Coupa Software is a global cloud-based Business Spend Management software platform. Its software products include employee travel and expenses, procurement, payments, invoicing, and supply chain. The Company was founded in 2006 and is headquartered in San Mateo, CA. It went public in 2016. The Company's shares have been down significantly since the start of 2022 with the rise of interest rates, geopolitical conflicts, and lower appetite for software tools as companies look to cut costs.
This news comes on the heels of Thoma Bravo's completion of fundraising for its buyout funds which total more than $32.4 billion in capital commitments across three funds: Thoma Bravo Fund XV ($24.3 billion Flagship Fund), Thoma Bravo Discover Fund IV ($6.2 billion Mid-Market Fund), and Thoma Bravo Explore Fund II ($1.8 billion Growth-Stage Fund). The Explore Fund recently lost over $125 million from its investment in the now-defunct crypto exchange FTX.
Inclusive of its Coupa takeover, Thoma Bravo will have deployed more than half of its Flagship Fund. Thoma's other notable acquisitions this year include:
- Anaplan, financial planning software, for $10.7 billion
- SailPoint, identity security software, for $6.9 billion
- ForgeRock, identity management software, for $2.3 billion
- Ping Identity, enterprise identity security software, for $2.8 billion
While Thoma Bravo has taken companies private in the past, 2022 marks a particular spike in take-privates. This is in part due to the weak performance of public software companies which saw their valuations sky rocket in the low interest rate environment through COVID. The below analysis on take-private acquisitions by Thoma Bravo between 2017 and 2022 YTD shows that while the number of deals year-over-year has been flat to slightly increasing, the cumulative deal value has gone up significantly. This is due to the fact that Thoma Bravo has paid higher EV / TTM revenue multiples (from a median 4.0x as of 2017 to 10.9x as of 2022 YTD).
U.S.-based private equity firms have been on a buying spree of public software companies as their stock prices fall, which means they are able to snatch up companies at lower valuations. Coupa Software's share price has been down almost 50% since the start of 2022. For comparison, the tech-heavy NASDAQ has been down 28%. The Company's stock traded at $369.64 less than two years ago.
In discussion with CNBC, Dan Primack, business editor at Axios, noted, "we have a huge amount of private equity capital and they aren't under enormous pressure to spend it but they will go bargain hunting... there was a period of time... in 2021 where there were 5 SaaS enterprise companies going public every single week and a lot of those are underwater... that's where I think you'll see a lot of takeover activity". This will most likely not be the last time we seen a headline on a major take-private in the technology sector.