Thoma Bravo finds the SaaSpocalypse hasn’t killed off all the deals

Thoma Bravo has demonstrated resilience amid the so-called SaaSpocalypse, a period when investors abandoned the software sector earlier this year. The private equity firm is offloading $1.5 billion in shares of cybersecurity-software company Imprivata as part of a strategy to refinance the $5 billion enterprise, according to sources familiar with the situation.

Investment banks JPMorgan and Evercore are spearheading the transaction. Thoma initially acquired Imprivata a decade ago, privatizing the company for around half a billion dollars. More recently, another Thoma-owned firm, British cybersecurity and software company Sophos, issued debt at a rate 5 percentage points higher than its benchmark, or approximately 9% all in, after difficulties in securing deals with existing lenders or refinancing with private credit firms.

Securing loans at this rate was once considered costly, particularly in a vibrant market, but is now viewed as competitive amidst a stagnant market for software company debt. Thoma Bravo did not provide comment on this narrative. Earlier this year, investors abandoned software services companies, fearing that agentic artificial intelligence, capable of crafting customized programs, would make the industries redundant.

This event, dubbed the SaaSpocalypse, led to the sale of shares in public software companies and financial losses for investment firms that heavily invested in software. Following an initial wave of panic, investors acknowledged that AI adoption has been gradual, and some essential corporate functions are proving challenging to replace.

Despite this, the idea of a slowdown in model development appears to have extended the life cycle of legacy software providers. Thoma Bravo, having experienced cycles before, was one of the few to venture into the post-panic market. Thoma Bravo recently divested Command Alkon to Francisco Partners and merged construction software company HCSS with the Build & Construct segment of Germany’s Nemetschek Group, retaining a minority stake in both.