Private-equity firm Turn/River Capital’s $4.4 billion deal to acquire SolarWinds Corp. and take it public, announced Friday, could portend more software firms leaving public markets so they can focus on long-term strategy without short-term earnings pressure.
At first blush, the deal is more than a private equity play, but a calculated bet on IT management software firms like SolarWinds to extend its dominance in hybrid and multi-cloud IT solutions. Earlier Friday, Mainline Information Systems, which is owned by HIG Capital, said it will purchase Converge Technology Solutions Corp., a cloud-computing company that is publicly traded.
Turn/River, which specializes in optimizing software companies and cloud-based software-as-service companies, already has investments in cloud-based IT company Paessler and cybersecurity company Tufin. Turn/River said it intends to sharpen SolarWinds’ offerings in observability, monitoring and service desk solutions.
Turn/River is paying $18.50 a share in cash for SolarWinds. The deal is expected to close in the second quarter. SolarWinds is controlled by Thoma Bravo and Silver Lake, which collectively control about 65% of the outstanding voting securities of SolarWinds, both of whom approved the Turn/River deal.
“We believe this was a solid move for both entities as both mission statements are closely aligned in accelerating digital transformation strategies with the acquisition expected to be completed this year,” Wedbush Securities analyst Dan Ives said in a note to clients Friday.
SolarWinds CEO Sudhakar Ramakrishna framed the deal as a way to give his company the ability to scale innovation and improve customer success without the pressures of Wall Street judging it every 90 days based on its quarterly results. “We are confident that Turn/River’s expertise and growth orientation will help us ensure SolarWinds continues to drive innovation and deliver even greater value for customers and stakeholders,” Ramakrishna said in a statement announcing the deal, which includes debt.
Indeed, debt-funded buyouts are expected to pick up this year as borrowing costs decline, paving the way for private-equity firms such as Blackstone, one of the biggest buyout firms, to pursue finance deals more cheaply.
Turn/River’s buyout of SolarWinds caps a tumultuous several years for the IT software management company. SolarWinds began exploring a sale in 2023, Bloomberg News reported at the time, a few years after a notorious data breach that scarred the company.
SolarWinds suffered a major hacking attack in 2020 that was tied to the Russian government, exposing the company’s customers at the State Department, Homeland Security and five branches of the U.S. military.
Within days, at least 200 organizations worldwide, including Microsoft Corp. and NATO, reportedly were affected by the attack.
Consequently, the Cybersecurity and Infrastructure Security Agency ordered federal civilian agencies to shutter SolarWinds Orion products until compromised accounts and identified threats were removed.
