Private equity, Content

Why Thoma Bravo Avoided Datto Buyout Bidding War

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Private equity firm Thoma Bravo -- owner of ConnectWise, N-able and Sophos, among others -- expressed interest in buying Datto at roughly $33.00 to $34.00 per share on February 28, 2022, multiple sources have confirmed to ChannelE2E.

But by April 7, 2022:

  • Thoma Bravo had a revised view of the bidding process -- telling Datto that the company was actually worth less than $33.00 per share.
  • On that same day, Insight Partners (owner of Kaseya) increased its bid to acquire Datto from $34.00 to $35.00 per share.

Final Offer: Kaseya Essentially Bids Against... Itself

From November 2021 through March 2022 or so, multiple companies expressed interest to Datto about buying the business at various prices. But when the final round of bids came due, Kaseya/Insight wound up bidding against itself on April 8, 2022.

On that day, Datto's board requested that Insight Partners/Kaseya increase its bid to potentially win the deal. Kaseya/Insight Partners did so, raising the offer from $35.00 to $35.50 per share -- though no other bidders were in the running, ChannelE2E has learned. Datto's board ultimately accepted the $35.50 per share offer from Kaseya/Insight Partners.

Related: See complete timeline of Datto Buyout Negotiations - November 2021 Through April 2022.

Why Thoma Bravo Walked Away From Datto Bidding Process

The big question: Why did Thoma Bravo essentially reduce its target price to buy Datto and walk away from the bidding process on April 7, 2022?

ChannelE2E has a thesis: Yes, Thoma Bravo respects Datto -- and had interest in buying Datto to merge the business with ConnectWise. However, the deal had to be at the right price.

Among Thoma Bravo's potential concerns, ChannelE2E believes: Much of Datto's business was build on cloud-connected hardware appliances. Those appliances are very popular with MSPs. But perhaps Thoma Bravo believes that Datto strength also is a potential weakness.

Hypothetically speaking, dozens of direct-to-cloud data protection services could disrupt Datto's hardware-based appliance offerings. Still, that disruption would require rivals to disrupt Datto's fiercely strong relationships with MSPs. Moreover, Datto is building out its own Continuity Service for Microsoft Azure.

Thoma Bravo vs. Kaseya/Insight Partners: Different Views of Datto's Valuation

Whatever the case, Thoma Bravo walked away from the bidding process with a reduced view of Datto's valuation, at the same time that Kaseya/Insight was increasing its view of Datto's valuation.

Time will tell who was using the right financial math...

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.