Shares of SailPoint Technologies (NYSE:SAIL) are currently up nearly 30% after Thoma Bravo agreed to acquire the cybersecurity company. Thoma is a private equity firm that manages more than $103 billion in assets under management.
The transaction, valued at an enterprise value of $6.9 billion, represents a premium of 31.6% from Friday’s close. Furthermore, shareholders of SAIL stock will receive $65.25 in cash for each share that they own.
Why Is SAIL Stock Up Today?
The transaction is expected to close during the second half of the year and will allow SailPoint to “pursue long-term growth trajectory with greater flexibility and expand their markets.” SailPoint’s board has already approved the deal, while shareholder approval voting has not yet commenced.
Additionally, SailPoint has enacted a go-shop provision. The provision expires on May 16 and allows the company to shop around and accept a better acquisition price from another suitor, if possible. SailPoint will delist from the New York Stock Exchange and become a private entity if the acquisition is successful.
SailPoint was founded in 2005 and became a public entity in 2017. Thoma Bravo first bought a stake in SailPoint in 2014, then exited during 2018.
The company reported Q4 earnings last February, which TechCrunch characterized as “decent, but not spectacular.” However, the publication states that those types of earnings are exactly what Thoma Bravo is looking for. During the quarter, revenue came in at $135.6 million, a 31% increase year-over-year. Meanwhile, total 2021 revenue tallied in at $439 million, up 20% from 2020.
Thoma Bravo Managing Partner Seth Boro believes that acquiring SailPoint will help the firm capitalize on rising cybersecurity trends. He added that, “Their market-leading identity security platform provides the autonomous and intelligent approach that the market requires today, especially among larger enterprises and as hybrid working becomes more common.”
Wedbush Is in Favor of SailPoint Acquisition
Wedbush analyst Dan Ives believes that the acquisition “is a smart strategic move for Thoma Bravo to double down on cyber along with their prior acquisitions.” The analyst maintained his “outperform” rating and price target of $60.
The deal represents an 11X enterprise value/sales multiple. In addition, Ives believes that cybersecurity spending will continue to grow, and points out Palo Alto Networks (NASDAQ:PANW), Fortinet (NASDAQ:FTNT) and Palantir (NYSE:PLTR) as some of his favorite stocks in the sector.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.