Business software provider Coupa Software is being taken over by Thoma Bravo for $8bn as the US-based buyout firm steps up a deal spree to take advantage of falling technology valuations.
Thoma Bravo, which recently completed a $32.5bn fundraising, has struck several deals this year for publicly listed US tech companies, including IT specialists Anaplan and SailPoint Technologies at the beginning of a steep correction for stocks in the sector earlier in 2022. It continued buying as tech valuations plunged, striking deals for cyber security companies Ping Identity and ForgeRock in recent months.
The private equity group will pay $81 per share for Coupa Software, which sells technology for businesses to manage corporate expenses, representing a 77 per cent premium to its trading price before reports of a potential deal emerged. Its shares were up 26.8 per cent to $78.71 in pre-market trading on Monday.
The Abu Dhabi Investment Authority will contribute a “significant minority investment” to the takeover, which is being financed by a group of 19 private lenders led by Sixth Street. The private loan is $2.6bn, according to sources familiar with the matter.
Thoma Bravo and Sixth Street declined to comment on the loan.
Coupa shares jumped 26.7 per cent to $78.65 in New York on Monday, trimming their decline in 2022 to about 50 per cent, although the company’s market capitalization remains well below its record of more than $27bn reached in early 2021. Some large shareholders have expressed resistance to selling their shares and valued the company higher than Thoma Bravo’s purchase price.
Last week, hedge fund HMI Capital Management in a letter to Coupa’s board of directors valued the company at over $95 per share. HMI did not immediately respond to emails seeking comment on Thoma Bravo’s purchase price.
In a presentation to shareholders, Coupa Software defended its sale price by noting its growth had slowed markedly this year. It also said it led a “robust” sale process, engaging with 11 private equity firms and three potential strategic buyers.
Coupa had been in late-stage talks with software buyout firm Vista Equity Partners until Thoma Bravo came in with a higher price, according to sources familiar with the matter. Vista declined to comment.
Shareholders in some publicly listed software companies have put up resistance to the takeover prices being offered for their investments. Hedge fund Light Street Capital Management said it would vote against the buyout of Zendesk by Hellman & Friedman and Permira this summer, but the acquisition closed in November without any changes to its terms.
Inclusive of its Coupa Software takeover, Thoma Bravo will have deployed more than half of its flagship buyout fund, which recently closed at $24.3bn.
Thoma Bravo, which invests almost exclusively in software companies, also raised a $6.2bn “Discover” fund for midsized software companies and a $1.8bn “Explore” fund for late stage growth software companies. Its earlier stage funds recently lost over $125mn investing in failed cryptocurrency exchange FTX.