US private equity group Thoma Bravo has raised its first dedicated European fund, as one of the industry’s most prolific investors hunts for software takeovers that are less pricey and competitive than in its home market.
The firm said on Tuesday that it had closed a €1.8bn fund for regional software deals, after establishing a London office in 2023.
While the firm has deployed €14bn of cash across deals in Europe during the past 14 years — including high-profile transactions like the buyout of the UK cyber security group Darktrace — the new fund cements its strategy in the region.
“We think Europe is better value,” said Irina Hemmers, a partner at Thoma Bravo who leads its Europe office.
Particularly in software, where the firm has carved out a niche, “the market isn’t as crowded as in the US . . . the ability for us to differentiate is even greater,” she said in an interview with the Financial Times.
Thoma Bravo’s European presence is modest compared with its overall $166bn in assets under management. The group has about 10 staff in Europe, including seven members of the investment team, out of about 100 investors globally, Hemmers said.
The new Europe fund will focus on mid-market software deals with enterprise values of between €150mn and €1bn, Hemmers said, with an emphasis on risk and compliance, healthcare, and tools for chief financial officers. Last year, Thoma Bravo closed its €400mn buyout of German corporate compliance group EQS.
The European push comes as some investors say US technology stocks are overvalued, offering few opportunities for substantial gains.
Hemmers cautioned that the macroeconomic outlook for Europe was still challenging, but that the software sector had fared better as bigger companies pushed to automate and digitise their operations.
“The macro context is not great and I think that’s why a lot of generalist investors are down on Europe,” she said. “Software is somewhat isolated from that.”
In the US, Thoma Bravo is set for a $4bn windfall after the initial public offering of cyber security specialist SailPoint in a transaction that would mark a large gain from a takeover struck at the height of the pandemic dealmaking frenzy.
Hemmers said that the US market for new listings was ahead of Europe, where many private equity groups are hoping for a revival that will allow them to exit some of their record unsold assets.
“We’re all watching the IPO markets hopefully opening,” she said. “We still need to see evidence about the European markets.”