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Another gentle of the London Stock Exchange firmament goes out. Darktrace has accepted a £4.3bn supply from US personal fairness investor Thoma Bravo. That the UK market’s lone cyber safety identify is leaving will, of itself, elevate eyebrows. That it’s prepared to take action for a comparatively low worth is a mirrored image of its troubled life as a public firm.
None of that is speculated to suggest that Thoma Bravo’s newest supply — which follows an aborted strategy in 2022 — is devoid of points of interest. With $138bn of property underneath administration, it is without doubt one of the largest software-focused traders on this planet and might assist Darktrace’s technique. It can use its clout to assist the UK group broaden its US consumer base. And it may possibly present Darktrace with capital and M&A experience to snap up different firms within the fragmented cyber safety area.
Financially, nonetheless, Thoma Bravo’s bid doesn’t appear like a knockout. True, at 620p a share Darktrace is getting a 44 per cent premium on its three-month common share worth, and a 148 per cent premium on its IPO worth three years in the past. That could clarify why long-term traders KKR and Summit Partners have dedicated to tender their 11 per cent of the corporate, as have administrators and insiders with an additional 3 per cent.
But that isn’t the entire story. Darktrace has lengthy been poorly valued. Even on the supply worth, it is just value 7.3 instances 2024 gross sales, on Panmure Gordon estimates. By distinction, US cyber safety group CrowdStrike trades at 17 instances revenues, and Palo Alto at 11.5 instances. These firms are giants, in comparison with Darktrace, and scale instructions a premium. Yet it’s laborious to shake the impression that Darktrace could also be promoting itself cheaply, particularly given its enhancing outcomes and the current share worth run.
By accepting Thoma Bravo’s supply, after all, Darktrace has in impact put itself in play. “Irrevocable” commitments, like these made by 14.4 per cent of shareholders, could be undone. Other suitors could but emerge, pushing up the premium.
But the cyber specialist, nonetheless among the many higher performers of the IPO crop of 2021, has had a really bumpy three-year experience as a public firm. It has needed to cope with accounting considerations, vocal brief sellers and its uncomfortable affiliation with Autonomy’s Mike Lynch, Darktrace’s co-founder who’s dealing with a fraud trial within the US the place he has pleaded not responsible.
All that comes earlier than you get to the much-discussed and debated valuation low cost for UK-listed shares. Perhaps it’s little marvel that Darktrace didn’t maintain out for prime greenback.