In a year when sponsors have made tentative but not full returns to the equity capital markets, Thoma Bravo provides a great case for a private equity firm dipping its toe in the water.

The Chicago-headquartered sponsor has been active in using ECM to sell-down positions in its listed holdings, according to Dealogic data, but it is yet to fully embrace the public markets by putting its private assets on the IPO track.

Thoma Bravo has been active in follow-ons in 2024, notably placing a USD 2.7bn block in Nasdaq [NASDAQ:NDAQ] in July at a tight discount of 2.48%. The deal was the PE’s second sell-down in the name in 2024.

This news service tracks the attractiveness of blocks pricing through a ratio known as Price of Liqudity (PoL), which measures discounts on a block trade versus the size of stake sold. On that metric Thoma Bravo’s July sell-down in Nasdaq was priced at an exceedingly tight PoL ratio of -0.34x the size of stake sold, well below the US market average for the month.

By avoiding systematic transactions, Thoma Bravo has proved to be careful in deciding when to launch its block trades in a bid to minimize market pressure and maintain investor confidence. This patient strategy has yielded positive results, such as the successful full exit from Dynatrace earlier this year, one of the firm’s most notable leveraged buyouts.

“Public equity investors appreciated the firm is not in a hurry to sell down and put stress on the stock,” said one source familiar with Thoma Bravo. By limiting the number of transactions and taking a price-sensitive stance, stock prices have done well as a result, the source added, describing the Nasdaq selldown, whose position has not yet been fully monetized, as opportunistic and well-received.

The sponsor was also active in selling down its stake in MeridianLink [NYSE:MLNK] in 2024, with two blocks, in February and September, raising cumulative proceeds of around USD 270m.

The company was also the last asset to be taken public by Thoma Bravo. It listed in a USD 374m IPO in 2021.

In 2020, McAfee, which at the time was backed by TPG and Thoma Bravo, listed at a valuation of USD 8.6bn. The cybersecurity company, which was founded in 1987, had gone public before being acquired by Intel in 2011, and was then spun out again in 2017. In November 2021, Thoma Bravo partnered with Advent International to take McAfee private once again in an all-cash transaction valued at USD 14bn.

Investor demand for technology stocks could give the sponsor more reason to hit public markets in 2025.

“It has become a reliable tech-oriented IPO issuer. I think they are shaping a profile of their own that is different from other sponsor issuers,” said one IPO investor, noting that other large sponsors were “more institutional” about the way they think of IPOs – fewer risks taken, only large cap, strong business fundamentals.

Thoma Bravo is demonstrating far greater versatility by engaging with both mid-cap and large-cap opportunities across technology segments, he added.

This approach appeals to growth-focused investors, especially those targeting innovation-driven sectors like cybersecurity and AI, as they increasingly eye the public markets for their portfolio companies, he said.

Unlike some of its peers that have dedicated equity capital markets professionals, Thoma Bravo’s wider capital markets team oversees this function in collaboration with managing partners and portfolio management teams to tailor strategies to individual situations, the source familiar with the firm said.

Dealogic data shows that the firm’s ECM issuance has been around USD 15bn since 2008.

ECM deal value for Thoma Bravo reached USD 2.9bn in 2024, up from USD 1.2bn in 2023. Its record came in 2020, when it hit USD 6bn. ECM deal volumes also hit the billion mark both in 2016 and 2019.

Prepping for an IPO wave

The success of Thoma Bravo’s Nasdaq and MeridianLink follow-on deals this year, which not only have made the company significant returns but have traded up since each deal, shows that there is money to be made in equity capital markets for both large and smaller-cap stocks. But the question is when the sponsor will take the next step and return to the IPO market.

The firm’s first IPO in 2017, SailPoint, served as a foundational learning experience. Since then, the team has refined its preparation process, ensuring that portfolio companies are fully equipped to meet public market expectations. While the firm recognizes that the IPO market has evolved—favoring profitability over unsustainable growth—its strategy remains adaptable.

The firm spends up to 18 months preparing portfolio companies for IPOs. This includes fine-tuning financial reporting, ensuring reliable forecasting, and building confidence in the company’s ability to meet and exceed market expectations. A notable example is Instructure, which consistently beat and raised forecasts for over two years post-IPO and was later taken private.

The source familiar with the firm noted Thoma Bravo is likely to wait for peers to successfully reopen the IPO market before moving forward with its own listings, citing the 2024 listing of a software firm like KKR-backed OneStream [NASDAQ:OS] as a blueprint for the type of companies Thoma Bravo will pitch to buysiders.

Its IPOs are likely to be well-telegraphed, because Thoma Bravo does not tend to formally pursue dual-track processes, said the source familiar. Still, the visibility of its high-quality assets often attracts unsolicited interest from strategic buyers during IPO preparations.

Thoma Bravo has two immediate candidates in its portfolio that are whetting market appetite, the return to the listed exchange of Texas-based enterprise identity security SailPoint and cybersecurity firm Proofpoint, which are expected to be brought to market in 2025 or early 2026 at the latest.

“It has several companies being prepped that I would put under growth category and likely to come at a premium to peers,” said one ECM banker.

Thoma Bravo has reportedly hired Morgan Stanley and Goldman Sachs on SailPoint; early looks have already started ahead of a launch in early 2025. SailPoint was privatized in 2022 by Thoma Bravo for USD 6.9bn. Its recurring annual revenue is approximately USD 600m, the company stated in September 2023.

Sunnyvale, California-based enterprise security firm Proofpoint, which was taken private in 2022 by Thoma Bravo in an all-cash transaction that valued the company at approximately USD 12.3 bn, is also on a path to the public markets, though it is yet to formalize an IPO syndicate.

Thoma Bravo does not tend to run formal bake-offs and prioritizes banks with strong software industry research and deepest ECM capabilities. The decision on the left lead bank is usually made alongside management, said the source familiar with the firm, adding that active discussions usually lead to the selection of the number two bank on the syndicate.

Proofpoint’s IPO could occur sometime in the next 12 to 18 months, the cybersecurity company’s CEO Sumit Dhawan told CNBC in October.

One source close to Proofpoint said the company, which has USD 2bn in revenue and EBITDA in the USD 750m-USD 800m range, expects to be a consolidator. Email security services accounts for 75% of its revenue and 25% comes from data management. Growth is 75% organic and 25% inorganic. A trade sale of the business would be hard given there are only a limited pool of potential strategic buyers, including Cisco or IBM. The company is among the top five pure-play cybersecurity companies alongside Crowdstrike, Zscaler and Palo Alto Networks.

One investor said a 2025 IPO is possible, but no banks have been hired yet. This investor praised its 30% EBITDA margin, adding that it could be a USD 4bn IPO.

One ECM attorney also pointed to digital enterprise security company Ping Identity, which the fund took private in 2022, as ripe for a return to the public markets. Ping Identity, founded in 2002 by Andre Durand, specializes in identity and access management (IAM) solutions, including single sign-on (SSO) and multi-factor authentication (MFA).

Under Thoma Bravo’s guidance, Ping has expanded in areas like cloud-based IAM and zero trust security.

These ventures encapsulate Thoma Bravo’s ability to maximize the value of its technology assets by acquiring or taking companies private, optimizing operations, and subsequently returning them to the public markets, the attorney said.

The ECM banker expects more companies in its portfolio to be prepared for IPO over the coming years.

The sponsor’s future IPOs will reflect a higher bar, focusing on larger portfolio companies with strong growth and profitability. While software IPOs have historically performed well on both Nasdaq and the NYSE, the firm’s significant shareholding in Nasdaq suggests a preference for this exchange in the near future.

Future Thoma Bravo-led IPO candidates are expected to be highly profitable, fast growing companies – albeit below the 30%-plus growth rates once favored by markets, which have since readjusted to more sustainable levels, the source familiar with the firm said.

While public markets remain a key monetization route, the firm has also achieved success through strategic sales to large corporations, such as the exits Ellie Mae to ICE in August 2020 and Adenza to Nasdaq in November 2023. These transactions provided significant liquidity, while maintaining flexibility during less favorable IPO windows.

The sponsor has been actively working on fostering direct relationships with large buy-side accounts. This strategy was demonstrated during the Dynatrace IPO with Dragoneer’s participation. Establishing early buy-side commitments serves as a cornerstone of the firm’s IPO strategy, as securing anchor orders has helped enhance market confidence and positioned its deals.

“They’ve proved to be a creative and strategic user of the capital markets, and always find an ear among investors,” the IPO investor said.

Thoma Bravo has seen how lucrative ECM can be for its public assets this year. The question is how long it will be for it to present some of its private ones.

Thoma Bravo declined to comment.