Tech floats to reach an apex thanks to Apax
LONDON is set for its biggest ever tech market float after Sophos announced its intention to float on the London Stock Exchange with an expected target valuation of more than $1bn.
The security software company has eschewed the trend of London’s tech firms crossing the pond in favour of a Nasdaq listing and expects to make its market debut in July on the FTSE 250.
Private equity firm Apax Partners, Sophos’s majority owner, will float at least a quarter of the company to raise $100m to reduce debt. It currently has net debt of $318.8m, or 3.1 times Earnings before interest tax depreciation and amortisation (Ebitda), for the year to March and aims to reduce that to 2.2 times that with the float. There will also be an over-allotment option with a secondary offer of up to 15 per cent of shares.
Apax acquired its 70 per cent stake in Sophos in 2010 for £372m.
The tech firm’s founders, Jan Hruska and Peter Lammer, who established the business in 1985, attempted to list in 2007 and 2009. However, both attempts were thwarted as the economic downturn curtailed investor appetite. Lammer and Hruska still hold minority stakes along with seats on the company’s board.
The IT security market is estimated to be worth $32.6bn and is forecast to grow by seven per cent this year and Sophos believes there is a growing market for security from mid-sized businesses.
The group sells its products to enterprises of all sizes but its development, sales and marketing efforts are primarily focused on the mid-market, defined as comprising enterprises with between 100 and 5,000 employees.
Sophos believes that this market, worth $18bn in 2014 and representing approximately 72 per cent of total IT security spending, has historically been underserved by IT security vendors due to their focus on either large enterprises or consumers.
Billings at the Oxford-based company, which boasts 100m users, were up 22.6 per cent for the year to 31 March to $476m.
“The importance of this cannot be over-emphasised…Assuming a valuation range of $1.5bn to $2.5bn, this will be the biggest tech IPO in the UK of all time. We’ve had very few in the last 15 years and most of those have been small,” said TechMarketView’s Richard Holway, on the decision to list in the UK.
BEHIND THE DEAL
ROBERT SORRELL – MOELIS & COMPANY
1 Sorrell was appointed managing director at Moelis in May 2014 to work with financial sponsor clients
2 He once ran his own hedge fund, Sorrell Capital and previously spent 14 years at Goldman Sachs.
3 He is a member of the well-known Sorrell family, which includes father Sir Martin Sorrell, chief executive of WPP, and brother Jonathan Sorrell, CFO at Man Group.
Also advising…
Moelis & Company is financial adviser to Sophos, joint global co-ordinators are JP Morgan Cazenove and Morgan Stanley, joint bookrunners are Deutsche Bank and UBS, co-lead managers are Numis and Pacific Crest.