Oct 12, 2022 - Economy & Business

Questions swirl around Thoma Bravo's ForgeRock buyout

Illustration of a Windows-style folder icon with a padlock on it.

Illustration: Aïda Amer/Axios

Private equity firm Thoma Bravo on Tuesday announced plans to buy identity management firm ForgeRock for $2.3 billion. And then both parties kept their mouths curiously closed.

Why it matters: This could be the latest building block of a digital identity giant, but right now we're left with more questions than answers.

Backstory: The press release hit at 8:30am ET yesterday morning, but ForgeRock didn't file any paperwork with the SEC until after market close. And, even then, some big details about deal structure and future strategy were scarce.

Debt ceiling: Neither the press release nor the merger agreement mention a dime of committed debt financing. So, for now, this is an unleveraged buyout — something that may be a new normal as Wall Street continues to choke on losses from existing deals.

  • Thoma Bravo is allowed seek debt financing, most likely via private credit funds, but that's not a closing condition.
  • ForgeRock senior management is required, per the agreement, to participate in meetings and presentations related to possible debt financing, but only "a "reasonable and limited number" of them.
  • It's also unclear what Thoma Bravo's selling point will be to lenders, given that ForgeRock's bottom line is red, its top-line growth is modest and interest rates keep rising. That leads us to...

Roll-up: One way to make ForgeRock's balance sheet more palatable would be to merge it with two other digital identity companies Thoma Bravo agreed to buy this year: Sailpoint and Ping Identity.

  • Yes, both of those companies also were unprofitable, but arguably there could be some synergistic cost savings.
  • A Thoma Bravo spokesperson declined to discuss the possibility of a merger when asked by Axios,
  • ForgeRock raised the roll-up possibility in a Q&A that appears to have been sent to company employees. But then it punted on the part employees would actually care about, instead saying: "Any future decision will be made based on what is in the best interest for all stakeholders: customers, partners and employees."

The bottom line: Tech buyouts are fraught right now, despite bargain bin prices and private equity's surplus of dry powder. So it's not surprising that some firms are playing it close to the vest, or maybe even playing it by ear.

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