Darktrace shares soar as US private equity swoops
Shares in Darktrace soared following a swoop from US private equity predators.
Cambridge-based Darktrace revealed it is in discussions with buyout group Thoma Bravo about a cash offer.
The American business has until September 12 to either make a firm offer or walk away.
High-profile: Darktrace is led by chief executive Poppy Gustafsson, who at 40 this month is one of the UK’s most high profile female bosses.
Darktrace shares jumped 24.2 per cent, or 100.4p, to 515.2p giving it a value of just over £3.3billion. Analysts said an offer of £4billion or 570p would be taken seriously by shareholders.
AJ Bell analyst Danni Hewson said: ‘570p would get everybody around the table. Talks would have start seriously at that point.’
A Darktrace spokesman said: ‘Discussions are at a preliminary stage and there can be no certainty that any offer will be made, nor as to the terms of any such offer.’
Darktrace is led by chief executive Poppy Gustafsson, who at 40 this month is one of the UK’s most high-profile female bosses.
The company has worked closely with the British intelligence services.
Darktrace’s AI-powered cybersecurity services offer greater detection speeds for ransomware and cloud attacks than systems that rely on human input.
As a result analysts say any deal is likely to be scrutinised by ministers using the National Security and Investment Act, which was introduced this year to give the Government powers to intervene in transactions on national security grounds.
If the deal were to be given the green light, it would be a hammer blow for the London Stock Exchange which has been plundered by buyout sharks since the Covid-19 pandemic began.
Already this year waste management firm Biffa has received attention from private equity firm Energy Capital Partners, while transport business First Group also received an unlisted bid in May.
Other British companies to be targeted in recent years include Morrisons, Ultra Electronics, Inmarsat and G4S.
Darktrace has enjoyed a successful, if turbulent, time since listing on the stock market in April last year at 250p a share.
The stock raced to highs close to 1000p later that year before falling back, dipping below 300p last month.
Windfall for Lynch amid fraud fight
The sale of Darktrace would trigger a huge windfall for controversial businessman Mike Lynch.
The 57-year-old – once dubbed Britain’s Bill Gates – still owns 4.3 per cent of the cybersecurity company.
That stake is worth £158million.
Stake: Mike Lynch is fighting criminal fraud charges related to the sale of that company to Hewlett-Packard in 2011
Lynch, the founder of Autonomy, is fighting criminal fraud charges related to the sale of that company to Hewlett-Packard in 2011.
Hewlett-Packard claims the company used accounting tricks to artificially inflate its value prior to the sale.
In January, the Home Secretary Priti Patel approved the extradition of Lynch to the US after months of legal wrangling that ended with the High Court in London rejecting an attempt by his lawyers to win more time to consider the order. Lynch has always said the allegations are ‘false’.
Darktrace warned about the risks arising from Lynch’s legal battles in the prospectus released ahead of its float last year, but Thoma Bravo will want to do its due diligence.
But if the deal is done it would mean another multi-million pound payday for Lynch, whose estimated wealth stands at £820million, according to Forbes.
Gustafsson has spoken publicly about the problems Darktrace has faced and in December last year said the company was ‘misunderstood’.
Brokers have criticised the company for relying too heavily on its marketing team to drive growth and asserted there was a ‘gap between the promise and reality’ of its products.
Gustafsson previously suggested that many of the criticisms levelled at the business represented misapprehensions about its technology and the scale of the opportunity in the cybersecurity industry.
Hewson said: ‘You can see why going private might appeal. While Darktrace shares trade materially higher than the 250p IPO price, it has seen considerable volatility since its April 2021 float.
‘The wild swings in the share price do suggest that UK investors have struggled to get to grips with this complex tech story.’
Former tennis star leading the hunt for cyber-crime pioneer
Dealmaker: Private equity boss Orlando Bravo (pictured with his wife Katy) has been snapping up software firms across the globe
Puerto Rican-born billionaire Orlando Bravo is the man behind the Chicago headquartered private equity firm on the hunt for Darktrace.
The 52-year-old is regarded as one of the hottest dealmakers in the US, snapping up software firms across the globe.
Thoma Bravo has grown to become a major player in the industry, taking six multi-billion companies private in 2021, including Proofpoint for £10billion – the largest ever cloud acquisition by a private equity firm.
So big has the buyout firm become that the company even approached Twitter in April in order to discuss placing a rival bid to Elon Musk.
But high finance wasn’t always Bravo’s passion. As a young man he initially excelled at tennis, leaving Puerto Rico aged 15 to go to Florida where he attended Nick Bollettieri’s gruelling academy.
It was there that he spent hours warring against the likes of Andre Agassi and Jim Courier, but he didn’t have what it would take to turn professional.
Instead he turned his attentions to the business world – initially becoming a merger and acquisitions banker for Morgan Stanley.
In 1997 he joined Thoma Cressey Equity Partners, which later became Thoma Bravo in 2008.
Under his direction the firm looks to buy software businesses with loyal customers but where sales growth has slowed.
The strategy has paid off and his net worth has accumulated to £5.2billion, according to Forbes.
He has all the trappings of success, including a stunning £32million mansion on Miami Beach that used to be the home of Phil Collins.
Bravo lives with his glamorous blonde wife Katy and three children.
Known for his high energy exuberance he has never been an apologiser for the huge sums of money that the private equity industry makes.
At a conference in Berlin last December he famously said that the private equity party would never end.
‘One of the questions that we always get asked is, when’s the party going to end? But the analogy is wrong because a party has a finite end,’ he bragged.
And given the current economic circumstances he is probably right with Bravo likely to expand its portfolio of companies as central banks move to tame runaway inflation.
In June he explained that there was pain to come for listed tech companies, adding that many would have to be taken private.
He said: ‘When those companies really start getting down to answering the investor question about the path to profitability, they’re not going to love what they see.
‘That requires a lot of cost reductions, it requires a lot of pain. And it’s difficult to execute especially in a public setting.’
