Thoma Bravo's $2.3bn ForgeRock acquisition brings 2022 cyber investment to $12bn

Private equity firm Thoma Bravo is set to acquire ForgeRock, an identity and access management (IAM) software company, for $2.3 billion.

The deal marks another major acquisition for the firm that already has cyber security giants such as Proofpoint, Sophos, and more recently Ping Identity in its portfolio.

Thoma Bravo will pay around $23.25 per share for the company, representing a premium of around 53% for ForgeRock’s closing share price on 10 October 2022, the companies revealed yesterday. The transaction is expected to close in the first half of 2023, subject to customary closing conditions including approval from ForgeRock shareholders.

The acquisition will see the IAM company become a privately held company once again. This comes merely a year after it went public, in September 2021, trading on the New York Stock Exchange. “Being a publicly traded company will help us grow into the company we need to become in order to advance our mission,” said Fran Rosch, CEO at ForgeRock, at the time.

“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,” Rosch underlined yesterday. “We are confident that Thoma Bravo’s resources and insights will help us continue to drive innovation in our platform and deliver even more value for customers.”

ForgeRock aims to eliminate the need for usernames or passwords so users never have to log in again, while ensuring customers are more secure and no longer need to worry about fraudulent account takeovers or identity breaches.

“Identity-centric cyber security 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,” said Chip Virnig, a partner at Thoma Bravo.

The private equity firm may have been interested in ForgeRock given the consistent increase in cyber attacks in recent years. Between mid-2020 and throughout 2021, there was an upwards trend of cyber attacks according to Check Point. Additionally, attacks on corporate networks increased by 50% in 2021.

In July, Check Point also discovered that ransomware attacks now impact one in 40 organisations every week. Incidents have risen 59% year-on-year, due to a mixture of increased geopolitical tensions, an increase in remote working, and organisations paying the costs of ransom.

Thoma Bravo's deep interest in cyber security

Thoma Bravo has over $122 billion in assets under management, as of 30 June 2022, and calls itself one of the largest private equity firms in the world. The company invests in innovative businesses operating in the software and technology sectors and over the past 20 years, it has acquired or invested in more than 400 companies.

Over the past few years, it has made major investments, including acquiring cyber security firm Sophos for $3.9 billion in October 2019 and security and compliance company Proofpoint for $12.3 billion in April 2021.

The private equity firm has also made a spate of acquisitions purely focusing on the digital identity management field in the last year, in addition to ForgeRock.

It acquired digital security specialist Ping Identity for $2.8 billion in August 2022 as well as digital identity management firm SailPoint for $6.9 billion in April. This means, following its latest acquisition, it will have spent around $12 billion on acquiring digital identity software companies in the last year.

The private equity company may have made the acquisitions in the past year to take advantage of a turbulent market. Inflation harms technology firms less than other sectors, due to mostly not relying on physical inputs in their production processes, according to the Bocconi Students Investment Club (BSIC).

This suggests that these firms’ revenues and profits continue growing in the face of inflation, suggesting that they still may be attractive to buyers.

Private equity investors have also shifted their attention to tech areas as the sector has become increasingly important, added the BSIC. Technologies, like cloud and IoT, have become more important to businesses than ever and make ideal investments to weather the pandemic.

BSIC said that thanks to the adoption of working-from-home mandates across the world, cyber security has become a priority for all tech services making it highly valuable.

“While it is uncertain as to whether private equity will continue its current streak of acquisitions, falling valuations have reduced strategic buyers investable assets while conversely setting up private equity firms to acquire companies at undervalued levels post-pandemic, meaning that it seems perfectly reasonable to expect an inverse relationship between falling tech valuations and the rate of private equity acquisitions, and a continued direct relationship between strategic buying and their own valuations,” said BSIC.