Thoma Bravo to buy UK-listed Darktrace for £4.3bn

US private equity firm Thoma Bravo has agreed to take UK cyber security company Darktrace private in a transaction valuing the company at £4.3bn, marking the latest high-profile takeover of a London-listed group.

The offer, which values the shares at 620p each, represents a 20 per cent premium to Thursday’s closing share price and sent Darktrace’s shares up 19 per cent in London on Friday. Darktrace floated in April 2021 at 250p a share.

Darktrace’s board said it had previously reviewed and rejected unsolicited offers from Thoma Bravo on the basis that they did not fairly represent the value of its business. The agreement comes after the two parties held discussions about taking the company private in the summer of 2022, when Darktrace’s market capitalisation was £2.7bn.

If the deal goes through, it would mark the latest high-profile take-private of a UK-listed company by an overseas private equity group. Last year, a number of UK companies, including veterinary pharmaceuticals company Dechra and the restaurant group behind Japanese dining chain Wagamama, were acquired by buyout firms.

The decision to go private will end a turbulent period on the London stock market for Darktrace.

Founded in 2013, the Cambridge-based group provides artificial intelligence-based cyber security services designed to protect companies against the threat of cloud attacks, which companies are increasingly confronting because of the proliferation of cyber warfare.

It took advantage of a surge in demand from investors for fast-growing technology companies when it listed three years ago, with its share price tripling in the six months after it went public.

However, the share price slumped later in 2021 after stockbroker Peel Hunt said it thought the company was only worth half of its market value.

In January 2023, New York-based Quintessential Capital Management published a report alleging Darktrace appeared to have simulated or anticipated sales to “phantom” customers through a “network of willing resellers”. The report also alleged the company seemed to have incorrectly booked sales of hardware as software and might have misrepresented the nature of its revenue.

Darktrace rebutted claims in the short seller’s attack.

The FTSE 250 group has also struggled to disentangle itself from ties with Mike Lynch and Autonomy, the UK software group he founded, as the British tech entrepreneur faces a fraud trial in the US. He has pleaded not guilty.

Darktrace said the trial was “not a Darktrace matter” and “relates to events which took place at Autonomy well before Darktrace was even founded”.

Lynch and his wife, Angela Bacares, collectively own around a 7 per cent stake in the company, according to Bloomberg data, standing to gain nearly £300mn if the sale goes through, based on its share count at the end of March.

Darktrace’s chief executive Poppy Gustafsson previously worked as Autonomy’s corporate controller and helped set up the cyber security company using funds in part from Lynch’s Invoke Capital.

Thoma Bravo is buying the business to help it expand into the US, where it owns dozens of enterprise software businesses, a person familiar with the matter said.

Darktrace’s board said: “The acquisition will provide Darktrace access to a strong financial partner in Thoma Bravo with deep sector and US markets expertise who can support Darktrace’s growth.”

Founded more than 40 years ago, Thoma Bravo has nearly $140bn in assets under management and is renowned as one of the world’s leading software investment groups.

The investment firm has been expanding its presence in Europe and announced in 2022 it was opening an office in London. Thoma Bravo said earlier this year that it had completed a deal to buy German compliance software company EQS Group.