Thoma Bravo Software Co. Pays $27M To Take Rival Private

Chicago-based Thoma Bravo, a buy and build specialist in technology and other fields, has capitalized on the recent weakness in the public markets with an add-on acquisition.

On Oct. 20, portfolio company Acresso Software agreed to purchase Nasdaq-listed Intraware Inc., an Orinda, Calif., provider of digital asset delivery and entitlement management services, for $27 million, or $4 per common share. The price represented more than a 29 percent premium to where shares of Intraware were trading just prior to the deal’s announcement, but the all-cash consideration is still well below the stock’s 52-week high of $6.12 from last October. The parties expect the transaction to close in December or January.

Intraware is best known for its SubscribeNet service, which lets technology companies deliver, track and manage the software and licenses they provide to their customers. For fiscal 2008, ended Feb. 29, the company posted a loss of $500,000, or 8 cents a share, on revenue of $12.2 million. Those results were an improvement over its loss of $3.2 million, or 52 cents a share, in fiscal 2007. For the second quarter ended August 31, Intraware lost $102,000, or 2 cents a share, on revenue of $3.4 million.

Thoma Bravo has been watching Intraware since at least April, when the firm acquired Acresso Software, a direct competitor, from Macrovision. That platform deal was Thoma Bravo’s first purchase out of its new fund, Thoma Bravo Fund IX, which is in the midst of wrapping up fundraising.

Intraware compliments Acresso Software because, even though their offerings are similar, Intraware delivers its technology through a “software as a service” model, while Acresso Software engages in traditional software unit sales. The combination also strengthens Acresso Software’s position in the entitlement and compliance management software and hardware industry, said Seth Boro, a principal at Thoma Bravo. Likewise, Acresso Software should benefit from access to Intraware’s customers, Boro said.

Thoma Bravo financed the purchase of Intraware in part by drawing down debt from Acresso Software’s existing facility.

Carl Thoma, managing partner, said that he’s seen lenders ask to renegotiate a platform company’s capital structure during add-on deals. But he noted that the Acresso Software platform, as well as platforms from prior funds, planned ahead with roomy debt facilities from the get-go. The firm’s platform companies have the capacity to continue rolling up targets for at least six months, he said.

Acresso Software, in particular, will continue buying software-as-a-service businesses in the entitlement and compliance technology industries. “With Acresso, we have a very long list of acquisitions we’re thinking about,” Borl said.

Thoma Bravo was known as Thoma Cressey Bravo until last year, when Managing Partner Bryan Cressey left to raise his own fund under the name Cressey & Co. That effort specializes in health care investments. Thoma Bravo, as it is now known, acquires companies with $10 million in EBITDA or greater, in the software, education, distribution, financial services and consumer products industries. The firm still manages Thoma Cressey Bravo’s last three funds alongside Cressey & Co.

Thoma Bravo’s latest fund, its first without Cressey, is nearing a final close on $800 million after cutting its target earlier this year.

CORRECTION: A previous version of this article misspelled the names of Seth Boro and Macrovision, and incorrectly referred to Thoma Bravo’s fund as Thoma Bravo Partners IX. The article also incorrectly identified the premium Thoma Bravo paid to Intraware’s stock price as 15 percent. The correct number, 29 percent, appears above. Buyouts apologizes for the errors.