Gary Steele, CEO, ProofpointScott Mlyn | CNBC
Even with private equity firms spending record amounts of cash for software in recent years, Thoma Bravo just trumped them all, announcing the biggest cloud buyout ever on Monday.
Thoma Bravo said it’s buying security software vendor Proofpoint in a deal valued at $12.3 billion. The announcement comes four days after Thoma Bravo closed its prior top cloud acquisition — the $10.2 billion purchase of RealPage, which serves the real estate industry.
The buyout firm has been building up a portfolio of cloud software vendors, focusing primarily on companies that have seen slowing growth rates and are selling at discounts to their peers. Founded in 2002, Proofpoint went public nine years ago and just passed $1 billion in annual revenue by providing software to stop malware and help businesses protect employees from phishing and other scams across mobile and cloud.
“We believe this is a great exit for a company that has significantly decelerated over the past two years,” wrote analysts at Mizuho Securities, in a note to clients. Proofpoint’s revenue growth slowed to 18% in 2020 from 24% in 2019 and 39% the year before that.
Before Monday’s announcement, the largest cloud software purchase in private equity came in 2019, when an investor group led by Hellman & Friedman agreed to buy Ultimate Software for about $11 billion. Thoma Bravo’s other cloud acquisitions include the $3.7 billion purchase of Ellie Mae in 2019 and the announced $2.4 billion purchase of Talend last month. Robert Smith’s Vista Equity Partners has been the other big private equity buyer in software, acquiring companies including Apptio, Mindbody and Pluralsight.
At the purchase price of $176 a share, Thoma Bravo is valuing Proofpoint at about 9.5 times revenue for 2021. That’s after a 34% premium to Friday’s closing price. Among the 58 companies in Bessemer Venture Partners’ cloud index, only 15 others trade below 10 times forward revenue. Companies with the highest multiples, Snowflake and Bill.com, have ratios well above 40.
As a private equity buyer, Thoma Bravo’s objective is to unlock opportunities for growth and profitability that can eventually make Proofpoint more valuable in a