With the major indices recovering from the volatility over recent days, shares of global digital identity leader ForgeRock (NYSE:FORG) stock jumped 49%, representing one of the key highlights on Tuesday. Thoma Bravo, one of the world’s largest private equity firms with a focus on the software industry, announced buying out the company in a deal worth approximately $2.3 billion. The institutional investor paid $23.25 per share for FORG stock in an all-cash transaction.
According to the accompanying press release, the “offer represents a premium of approximately 53% over ForgeRock’s closing share price on October 10, 2022, the last full trading day prior to the transaction announcement.” As well, it reflects a premium of about 44% over the volume-weighted average price of FORG stock for the 30 days ending Oct. 10.
“We are pleased to partner with Thoma Bravo to build on the strength of our comprehensive platform,” said ForgeRock CEO Fran Rosch. “The transaction offers a unique opportunity to create value for all of our stakeholders and is a clear validation of our team’s outstanding work and the start of an exciting new chapter for ForgeRock, our customers, and our partner ecosystem.”
On the other end, Chip Virnig, a partner at Thoma Bravo, stated, “Identity-centric cybersecurity solutions are a critical enabler for businesses to digitally transform their operations, and ForgeRock’s solutions combine both the advanced security and customer usability needed in the market.”
FORG Stock Offered Relevancies for the New Normal
For stakeholders of FORG stock, the benefit of the buyout centered on the lifeline that it represented. Prior to the acquisition announcement, ForgeRock slipped roughly 39% on a year-to-date basis. Therefore, the trajectory sans deal did not bode well.
But for Thoma Bravo, its all-cash offer also makes plenty of sense from a fundamental perspective. Aside from the relative market discount, the private equity firm gains relevance in the burgeoning cybersecurity space.
According to Reuters, “Distributed workforce and increased cyberattacks on businesses during the pandemic have pushed up demand for digital security solutions, helping drive growth for companies like ForgeRock that provides tools and software against such threats.”
To bring additional context to the problem, Forbes noted that in 2021, “the average number of cyberattacks and data breaches increased by 15.1% from the previous year. Over the next two years, the security executives polled by ThoughtLab see a rise in attacks from social engineering and ransomware as nation-states and cybercriminals grow more sophisticated.”
On its own, the enterprise undergirding FORG stock couldn’t quite attract investors. Although ForgeRock commands a stable balance sheet, it ranks poorly in the profitability department, per Gurufocus.com. Therefore, the anticipation is that Thoma Bravo can shore up certain vulnerabilities to address an increasingly vexing challenge.
On the date of publication, Josh Enomoto did not have (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.
