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Private equity swoops on Sophos

British cyber security star picked up by technology sector investors for $3.9bn

Technology sector private equity investor Thoma Bravo is to acquire Sophos for about $3.9bn (£3.05bn) – around £5.83 per share – through a newly incorporated vehicle to be called Surf Buyer.

Thoma Bravo, which has a 40-year history of specialist technology investments – recent acquisitions include Imperva, Barracuda Networks and SolarWinds – said it saw Sophos as an “attractive opportunity to increase its exposure to the large and growing cyber security market”.

It cited Sophos’ market-leading position in next-generation security, including endpoint protection, firewalls, cloud and server security, and managed threat response, alongside its cloud-native management platform Sophos Central, which brings its portfolio together in a single synchronised system.

“We are excited by the opportunity to partner with the Sophos management team and employees as we further develop Sophos as a best-in-class software franchise and next-gen security leader,” said Thoma Bravo managing partner Seth Boro.

“The acquisition fits with our strategy of investing in and growing software and technology businesses globally. The global cyber security market is evolving rapidly, driven by significant technological innovation, as cyber threats to business increase in scope and complexity.

“Sophos has a market-leading product portfolio and we believe that, by applying Thoma Bravo’s expertise, operational framework and experience, we can support the business and accelerate its evolution and growth.”

Sophos CEO Kris Hagerman said: “Today marks an exciting milestone in the ongoing journey of Sophos. Sophos is actively driving the transition in next-generation cyber security solutions, leveraging advanced capabilities in cloud, machine learning, APIs [application programming interfaces], automation, managed threat response, and more. We continue to execute a highly effective and differentiated strategy, and we see this offer as a compelling validation of Sophos, its position in the industry and its progress.”

The Sophos board has voted unanimously to recommend the offer to the firm’s current shareholders and, subject to relevant approvals and competition clearances, the deal should go through some time during the first three months of 2020.

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“It is the view of the Sophos board that this is a compelling offer for Sophos shareholders which secures the delivery of future value for shareholders today,” said Sophos chairman Peter Gyenes.

“Thoma Bravo has deep sector expertise in cyber security software, as well as a long and successful track record of partnering with, and investing in, its portfolio companies to support long-term growth and success. Under Thoma Bravo’s ownership, we expect Sophos to accelerate its evolution and leadership in next-generation cyber security.  The Sophos board believes that this recommended offer delivers a significant opportunity for all stakeholders – our shareholders, customers, partners and employees.”

Sophos was established in the UK – its headquarters remain in Oxfordshire – 34 years ago as a developer of antivirus and encryption tools. It employs just over 3,300 people and last year made total revenues of about $641m. Globally, it boasts 400,000 customers, 47,000 channel partners and 100 million users. For the first half of its fiscal 2020, it expects to report 9% billings growth at constant currency rates, 12% in subscription billings. Full interim results are expected in early November.

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