Thoma Bravo Earns 4x On Datatel

Target: Datatel

Price: $570 million

Seller: Thoma Bravo

Buyers: Hellman & Friedman, JMI Equity

Buyout firm Thoma Bravo brightened up the dreary exit market this month when it sold higher-education software company Datatel in a deal that quadrupled the firm’s investment. The buyout shop sold the company, which it had owned for about four years, to Hellman & Friedman and JMI Equity.

Terms of the deal were not disclosed, but a source familiar with the situation said the transaction was valued at $570 million, earning Thoma Bravo a 4x return on one of the largest investments from its seventh fund. That fund had posted an IRR in the high 30 percent range as of late 2008, Buyouts previously reported. In addition to plumping up Thoma Bravo’s already-fat return, the sale represented a win for co-investors Trident Capital, HarbourVest Partners and JP Morgan Asset Management.

Under Thoma Bravo’s ownership, Datatel doubled its earnings and used its cash flow to pay down debt organically. Meanwhile, Thoma Bravo took a $124 million dividend from the company through a 2006 recapitalization.

Thoma Bravo Partner Orlando Bravo said the firm had planned to hold Datatel longer, but chose to sell when Hellman & Friedman approached the firm with a fair price. “Datatel is the kind of property that we’d like to hold forever,” he said. “But we’re in the business of providing liquidity to LPs.”

Datatel has “quality revenue” and “mission critical” products; qualities known to make technology services investors salivate, Bravo said. As the independent market leader with loyal customers, the company’s revenue is steady and predictable, he added. Thoma Bravo worked with the company to improve its services, margins and productivity gains. Further, the company’s end market—education—has seen a significant boost since the recession hit.

In addition to its exit, Thoma Bravo has been an active acquirer, purchasing technology companies Flexera Software, Manatron. Inc. and Entrust. Bravo said the firm plans to continue its deal pace in 2010.

Thoma Bravo’s latest fund, Fund IX, closed earlier this year with $822.5 million in commitments. It was the first fund raised under the name Thoma Bravo. Formerly known as Thoma Cressey Bravo, the firm split with Bryan Cressey when the latter spun off the firm’s health care investments into the firm Cressey & Co.

The Datatel deal kicked off a string of successful mid-market exits. Days after Thoma Bravo announced its sale, Sun Capital Partners said it made 5.25x its money through its sale of Timothy’s Coffees to Green Mountain Roasters Inc., while Castle Harlan and its Australian affiliate CHAMP Private Equity posted a 4.5x return on its sale of United Malt Holdings to GrainCorp (see related story on page TK).