Oct 14, 2019 Thoma Bravo has acquired more than 200 software and technology companies during its 40-year history. It said the existing Sophos management and employees would be key to the business’s success. And SAN FRANCISCO, Calif.– March 2, 2020 – Sophos, a global leader in next-generation cybersecurity, today announced the completion of its acquisition by Thoma Bravo, a leading private equity firm focused on the software and technology-enabled services sectors, in a cash transaction that values Sophos at approximately $3.9 billion.

Private equity giant Thoma Bravo has offered to purchase Sophos for $3.82 billion less than four and a half years after the SMB platform security stalwart went public.

Thoma Bravo, with headquarters in Chicago and San Francisco, said the proposed acquisition of Abingdon, U.K.-based Sophos would fit the private equity firm’s global strategy of investing in and growing software and technology businesses. The 583 pence per share ($7.40 per share) deal represents a 37.1 percent premium over Sophos’ Friday closing price of 425.5 pence per share ($5.30 per share).

“They know the space, and they know what’s necessary to succeed and drive innovation and growth and operational performance to accelerate both the top line and bottom line,” Sophos CEO Kris Hagerman told CRN. “They’ve worked with a lot of cybersecurity companies, so they’ve seen a lot of different business models.”

[Related: New Sophos Managed Threat Response Tool Lowers Noise From Data]

Specifically, Hagerman said Sophos’ board felt the acquisition by Thoma Bravo could help the company boost its progress around next-generation network and endpoint security technologies. Thoma Bravo’s deep security expertise should help with everything from strategic consideration of M&A to expanding and accelerating the company’s MSP, subscription and Software-as-a-Service offerings, Hagerman said.

“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,” Thoma Bravo Managing Partner Seth Boro said in a statement.

Sophos’ stock is up 154.30 pence ($1.94 per share), or 36.26 percent, to 579.80 pence per share ($7.27 per share) in trading midday Monday on the London Stock Exchange. The company’s board of directors plans to unanimously recommend the offer to Sophos shareholders, and the acquisition document indicated that 27.2 percent of Sophos shareholder votes have already been pledged in favor of the transaction.

“Thoma Bravo has deep sector expertise in cybersecurity 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,” Sophos Chairman Peter Gaines said in a statement. “Under Thoma Bravo's ownership we expect Sophos to accelerate its evolution and leadership in next-generation cybersecurity.”

Thoma Bravo said it plans to continue operating Sophos as a stand-alone business group, and doesn’t expect to undertake any material restructuring, material headcount reduction, or change in location to Sophos’ headquarters. However, the private equity firm does plan to reduce noncritical administrative expenses as well as go-to-market program spend that offers a lower return on investment.

The initial nonbinding acquisition proposal from Thoma Bravo came in June 2019, according to the acquisition documents.

The acquisition offer by Thoma Bravo comes nearly four and a half years after Sophos raised $125 million as part of an initial public offering that valued the company at $1.6 billion. And the IPO came five years after private equity firm Apax Partners acquired Sophos for $830 million.

Thoma Bravo Sophos Software

Thoma Bravo has been extremely active in the cybersecurity space recently, purchasing storage and security player Barracuda Networks for $1.6 billion in February 2018; security information and event management vendor LogRhythm in July 2018; application and data protection vendor Imperva for $2.1 billion in October 2018; and application security vendor Veracode for $950 million in November 2018.

In addition, Thoma Bravo bought a majority stake in identity management vendor Centrify in July 2018, and then in October 2018 spun off its Identity-as-a-Service business into a stand-alone company called Idaptive, which is also owned by Thoma Bravo.

[Editor’s Note: Register now to see Mike Hoffman, principal at Thoma Bravo, deliver a keynote address at the NexGen Conference, hosted by CRN parent The Channel Company, Oct. 22 – 24 in Anaheim, Calif.]

Sophos plans to cull its workforce by up to 16 percent and close some offices just three months after being acquired by private equity firm Thoma Bravo, according to media reports.

Sophos confirmed the restructuring in a statement to CRN, but did not respond to questions about how many workers were impacted and in what job functions or geographies. Thoma Bravo did not respond to a request for comment.

The Abingdon, U.K.-based platform security vendor has already started reducing headcount, with the coronavirus pandemic forcing Thoma Bravo to take steps to bolster Sophos’ short-term outlook and accelerate the company’s strategic transition, according to Private Equity News. The cuts will potentially amount to around 16 percent of Sophos’ overall headcount, Private Equity News reported.

[Related: Sophos Eyes More M&A After Close Of $3.9 Billion Thoma Bravo Deal]

“Sophos is implementing some internal restructuring to respond to the change in market conditions associated with COVID-19, and to accelerate the evolution already underway to our next-gen product portfolio,” the company said in a statement. “A restructuring is always a difficult decision, but we believe it is necessary to position Sophos for continued growth and success in the years to come.”

The job cuts are impacting staff across multiple divisions and geographies, though the United Kingdom is believed to be the worst-hit location, according to The Register website. One hundred employees, primarily from Sophos’ sales engineering division, were told last week that their services would no longer be required, The Register reported.

The company intends to continue hiring for positions that are aligned with its transformation plan and will consider staff affected by the job cuts for those positions where appropriate, Private Equity News reported. For the quarter ended March 31 Sophos said its next-generation product billings grew by 37 percent year-over-year and now represent more than 63 percent of the company’s overall business.

Sophos employs 3,400 people throughout 51 offices, according to the company’s 2019 annual report. The company doesn’t plan to close any of its facilities in the United Kingdom, according to Private Equity News.

More than 77 percent of Sophos’ 3,400-person workforce is based in one of five countries, according to the company’s 2019 annual report: India, with 819 employees; the United States, with 607 employees; the United Kingdom, with 589 employees; Germany, with 310 employees; and Canada, with 305 employees. Sophos has multiple offices in eight countries including 10 sites in India; four sites in the United States; three sites in Germany and China; and two sites in Canada, Austria, Italy and the Netherlands.

Thoma Bravo Sophos Client

The job cuts are a departure from the expectation Thoma Bravo set when it first announced the $3.9 billion purchase of Sophos in October. At that time, Thoma Bravo said it didn’t expect a review of Sophos’ business and operations in the six months after the deal closed to result in a material headcount reduction. The acquisition closed in March.

Thoma Bravo said that it attached great importance to the skills, knowledge and expertise of Sophos’ management and employees, and therefore expected that the existing management and employees would be key to the company’s success going forward. Sophos CEO Kris Hagerman reaffirmed to CRN in February, before the full onset of the COVID-19 pandemic, that no material restructuring of the company’s business was expected under Thoma Bravo.

Orlando Bravo

The private equity firm said in October that it planned to probe opportunities to streamline operational functions at Sophos to help accelerate top-line growth. Thoma Bravo also said at the time that it planned to reduce spending on legacy and noncore products while upping investment in areas like next-generation endpoint and network security that are expected to enhance the customer experience.

Thoma Bravo also said in October that it additionally planned to reduce noncritical administrative costs at Sophos as well as go-to-market program spending that offered a lower return on investment. The private equity firm has gotten deeper into cybersecurity with the purchases of Barracuda Networks, LogRhythm, Imperva, Veracode and Centrify, but just last month sold Idaptive to CyberArk for $70 million.