FTSE 250 cyber security specialist Sophos (SOPH) has received a 583p per share takeover bid from US private equity firm Thoma Bravo, priced at a 37.1% premium to Friday’s closing price.

The deal represents a full circle for Sophos, which used to be owned by private equity until joining the stock market in 2015.

Apax Partners bought a majority holding from the founders of the business in 2010 for $830m and still holds a 10% stake today. Thoma Bravo’s bid values the whole business at $3.95 billion, based on equity and debt.

Shareholders haven’t done too badly since Sophos joined the stock market, with the shares up 159% since the initial public offering (IPO) in 2015.

The acquisition price represents around 32 times the company’s free cash flow of $124m for the period ended 31 March 2019. This makes the takeover price relatively expensive.

This isn’t the first transaction between the two private equity powerhouses; back in 2016 Thoma Bravo sold network performance solutions business InfoVista to Apax for an undisclosed amount.

Thoma Bravo has over $30bn in investor commitments and focuses on the software and technology sector. Over the past 20 years the firm has acquired more than 200 software companies representing over $50bn of value.

Topsy-turvy share price

It’s been a rocky couple of years for Sophos’ shares which hit a peak in January 2018 of 643p, then halved over the next year to hit a trough in March this year of 306p as a result of falling business momentum which seemed to stall in the face of increasing competition.

In May 2019 the company rediscovered its footing after reporting a step change in profitability, reporting an adjusted operating profit up 87% to $109m for the year ended 31 March.

The transaction represents another blow to the London-listed software sector which has been hollowed out over the last few years with the loss of Autonomy and ARM, among others.

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Issue Date: 14 Oct 2019