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.

READ MORE ABOUT SOPHOS HERE

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo

Issue Date: 14 Oct 2019