Key Takeaways
- Orlando Bravo's Thoma Bravo grew to nearly $200 billion in assets, focusing on U.S. tech buyouts since 2010.
- The firm operates with a small team and emphasizes deep operational engagement and mentorship in its acquisitions.
- Thoma Bravo targets established software companies with recurring revenue, leveraging terminal value appreciation over cash flow yield.
- Due diligence involves extensive customer and employee feedback, along with data-driven evaluation of operational efficiency.
Deep Dive
- Orlando Bravo, born in Puerto Rico, became the first billionaire from the island in 2019.
- Thoma Bravo, founded in 2008, has grown to nearly $200 billion in assets with a recent $34.4 billion fundraising round.
- Bravo was initially told private equity opportunities were limited in 1997 but was later hired by Carl Thoma.
- Thoma Bravo maintains a small team of 230 people to foster an outward focus and facilitate knowledge transfer.
- The firm decided to concentrate on U.S. tech buyouts, supported by mentor Carl Thoma, rather than Latin American private equity.
- Its fundraising strategy began with a $50 million deal and expanded incrementally, acquiring SonicWall for $550 million in 2010.
- Private equity is described as a change agent in the U.S. economy, with strong alignment to capital sources through performance-based returns.
- Thoma Bravo clarifies its focus solely on acquiring established software companies with recurring revenue, differing from past broader PE practices.
- The firm navigates challenges in underwriting AI-related risks, as rapid technological shifts conflict with investors' need for consistency and predictability in SaaS.
- Thoma Bravo acquired Boeing's avionics business for $10.5 billion, demonstrating a competitive approach to transacting at a fair price.
- The deal originated from an email inquiry to Boeing's CEO, leading to a competitive process involving approximately 15 private equity firms.
- Boeing sold the Jeppesen system to rationalize its business, focus on new plane development (e.g., 737 MAX), and manage debt.
- After acquisition, Thoma Bravo transforms companies by focusing on cost-cutting and improving efficiency to shift from revenue multiples to EBITDA multiples.
- The playbook involves assessing management and talent, backing open-minded, data-driven leaders supported by employees and customers.
- Key personnel are identified through methods like customer feedback and employee interviews to guide operational changes.
- Thoma Bravo's due diligence includes speaking with customers, conducting backdoor references, and interviewing former employees.
- The firm uses a data-driven approach, analyzing metrics like gross margins and support call volume to assess product quality and operational efficiency.
- Orlando Bravo currently expresses no impetus for Thoma Bravo to go public, prioritizing investor returns and the firm's core strategy.