Thoma Bravo has recently celebrated the successful exit of Dynatrace, a leader in the observability software sector, marking a significant milestone in its investment journey. This exit, which concluded a decade-long partnership, has been hailed as one of the firm’s best deals ever, showcasing the transformative potential of strategic investments in technology.
Key Takeaways
Dynatrace was acquired for $2.4 billion in 2014, during a time when it was perceived as a declining asset.
The investment led to the creation of two distinct companies: Dynatrace and a revitalized Compuware mainframe business.
Dynatrace went public in 2019 and has since delivered impressive returns, with industry estimates suggesting a 50% internal rate of return over 9.5 years.
The Journey of Dynatrace
In 2014, Thoma Bravo acquired Dynatrace from Compuware for $2.4 billion, recognizing its potential in the burgeoning field of cloud computing and application performance monitoring. At the time, many viewed Compuware as a legacy company struggling to adapt to modern technological demands.
The firm’s strategy involved separating Dynatrace from Compuware, allowing it to focus on its core competencies in observability. This move not only revitalized Dynatrace but also enabled the mainframe business to thrive under a new identity.
Strategic Growth and Market Positioning
Thoma Bravo’s approach to growing Dynatrace involved several key strategies:
Empowerment of Management: The firm placed a strong emphasis on empowering the existing management team, allowing them to drive innovation and growth.
Modern Sales Tactics: By restructuring the sales teams, Thoma Bravo introduced a more aggressive sales strategy, focusing on both new business acquisition and customer retention.
Cloud Transition: Recognizing the shift towards cloud computing, Dynatrace developed a cloud-native product that positioned it as a leader in the market, competing effectively against established players like AppDynamics and New Relic.
Financial Success and Returns
While specific financial returns were not disclosed, industry sources indicate that Dynatrace generated approximately $8.6 billion in proceeds, with an estimated $8 billion in gains. This translates to a remarkable return of 13.5x for Thoma Bravo Fund X and 12.5x for Fund XI, solidifying Dynatrace’s status as a standout investment.
Conclusion
The success of Dynatrace under Thoma Bravo’s stewardship exemplifies the power of strategic investment in technology. By identifying potential in a seemingly declining asset and nurturing it through innovative management and market positioning, Thoma Bravo has not only achieved significant financial returns but has also contributed to the evolution of the software industry. As the digital landscape continues to evolve, Dynatrace stands as a testament to the importance of foresight and adaptability in investment strategies.
Sources
Dynatrace ranks as one of Thoma Bravo's best deals ever | PE Hub, PE Hub.
Dynatrace ranks as one of Thoma Bravo's best deals ever | PE Hub, PE Hub.