Jun 22, 2022 - Economy

Thoma Bravo's big tech repricing

Illustration of multiple vintage price tag stickers stuck one on top of the other.

Illustration: Aïda Amer/Axios

Thoma Bravo this morning completed its $10.4 billion take-private acquisition of Anaplan, a San Francisco-based provider of business planning and performance management software.

Why it matters: The buyout was valued at $10.7 billion when first announced in March, or $66 per share vs. the $63.75 per share that the private equity firm ultimately paid. And that repricing has opened a lot of dealmaker eyes, given that it comes against the backdrop of plummeting tech valuations.

What to know: Sources close to Thoma Bravo insist that this isn't a macro story, pointing out that the firm recently closed on its $2.6 billion takeover of fintech company Bottomline at the original terms signed last December. Instead, they say it was an Anaplan-specific issue.

  • But it's not quite so cut-and-dried.

Details: According to an SEC disclosure, Thoma Bravo objected to certain equity grants awarded by Anaplan's board of directors, which it claims violated an interim operating covenant between the two sides.

  • Anaplan's board disagreed, suggesting the grants were immaterial and ordinary course of business. Moreover, it proposed what it called "a plan to avoid the economic impact of the interim equity award grants on Thoma Bravo."
  • For context, we're talking relatively small dollars here. Just $32 million in equity grants above what was in the original agreement, almost all attributed to new hires ($137 million net, once forfeitures for departing employees was included, vs a $105 million pool).

A key passage from the filing reads:

"A representative of Thoma Bravo emailed [Anaplan] asserting that Thoma Bravo believed (i) that the $105 million pool for additional equity awards agreed upon in the disclosure schedule to the Original Merger Agreement was already generous for the sign to close period, (ii) that the additional requested equity awards beyond such pool effectively represented a purchase price increase to Thoma Bravo, which was particularly concerning given the events that have transpired in the financial markets."

Catch that last part about financial markets? Maybe this wasn't only a macro story, but it sure seems to be primarily a macro story with some minor covenant violations as pretext.

Look ahead: Expect many buyers, both financial and strategic, to dig deep into what happened with Anaplan; as they seek to reprice their own deals.

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