On February 7th, SolarWinds announced its plan to go private in a $4.4 billion deal with buyout firm Turn/River Capital, reflecting the increasing trend of debt-funded transactions with declining borrowing costs.
Following this announcement, shares of the IT management software company surged by 23%. Over the past twelve months, the stock had dropped by 35% up to its most recent closing price.
Private equity firms are now showing more interest in acquiring software companies with a robust enterprise clientele that generates consistent revenue. This uptick in buyout activities is anticipated to continue due to more affordable financing options facilitating additional acquisitions.
Analysts at Truist Securities noted, "We believe that SolarWinds' healthy free cash flow margins attracted financial buyers."
As part of the agreement, Turn/River Capital will pay $18.50 per share in cash to SolarWinds' shareholders, offering a 23.1% premium over the previous closing price. The transaction is slated to be finalized in the second quarter.
Thoma Bravo and Silver Lake, holding around 65% of SolarWinds' outstanding voting securities, have endorsed the deal.
Reuters calculations show that the equity value of this go-private transaction amounts to $3.16 billion.
SolarWinds' software specializes in ongoing network performance monitoring, aimed at identifying and resolving issues like sudden surges in network traffic that could cause delays or downtime.