Thoma Bravo gets better than face value from Compuware

Contact: Scott Denne

At first glance, the $2.5bn take-private of Compuware looks like a fairly typical (though larger) Thoma Bravo deal – the private equity firm has bought many aging, but profitable, tech companies for multiples that are similar to this transaction. After stripping away the results for Covisint, the services business that it’s unloading as part of the deal, the terms look quite different.

The acquisition values Compuware at $10.92 per share, but that includes the 80% stake that Compuware holds in Covisint, a former subsidiary that Compuware took public last year, which will be distributed to Compuware shareholders ahead of the close. That per-share price gives Compuware a 3.1x trailing revenue valuation and 21.5x enterprise value to EBITDA multiple – both are on the high end of what Thoma usually pays.

Since Thoma isn’t actually paying for Covisint, stripping out that company’s financial performance and implied value makes Compuware a relative bargain. After backing out Covisint’s low revenue and high operating expenses, the EBITDA multiple drops to 12.3x, well below the median 17.4x for a Thoma Bravo take-private, not to mention the 22.3x it put up for Compuware rival Keynote Systems last year, according to the The 451 M&A KnowledgeBase.

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