Barracuda was sold to another private equity firm: Blocks and Files

Barracuda Networks mail backup and security provider was sold by its private equity owner to another, providing an indication of late-stage startup life after an IPO was ruled out.

Barracuda was acquired for $ 1.6 billion in November 2017 by Thoma Bravo, a private equity investment firm. Thoma Bravo has now sold it to KKR for an undisclosed sum. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners who manage hedge funds.

Barracuda CEO Hatem Naguib said, “We are grateful to Thoma Bravo for their invaluable strategic and operational support over the past four years.”

Chip Virnig, partner of Thoma Bravo, added: “Barracuda has been an extraordinary partner for the past four years and has experienced strong growth in products, customers and revenues. We have enjoyed working closely with Hatem and his team through multiple acquisitions and operational improvements and are confident that the company is well positioned for continued success. “

Barracuda Networks’ business started in 2003 and grossed $ 46.4 million across five funding rounds, according to Crunchbase, but it lists two rounds for undisclosed sums, so it likely understates the total raised.

When bought by Thoma Bravo, Barracuda was a $ 400 million business. Financial analyst Jason Ader said at the time: “For Barracuda, we believe the acquisition of Thoma Bravo is likely the best scenario for shareholders given the skepticism of the company’s ability to shift business from on-line equipment. premise to cloud-based solutions and the recent margin of challenges “.

Thoma refocused the business on public cloud security together with network security (firewall) and small and medium business customers. Now KKR partner John Park says, “We are thrilled to complete this transaction and begin working with the Barracuda team to support their continued growth and delivery of next generation cloud-first cybersecurity solutions that protect SMBs from a evolving threat landscape. “

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The sequence of events is that Barracuda was founded in 2003, has grown with VC funding to its execution rate of $ 400 million per year, but an IPO has not occurred. Instead, 14 years after its founding, it was purchased in an early private equity transaction phase. Almost five years later, he is in the second phase of his private equity life.

We think Phase 1 has reshaped it as a continuing and reliable profitable business. We also think it likely that Thoma Bravo would have sold Barracuda to a publicly owned company if one wanted to be a buyer, but KKR bought it instead.

The pattern of events here is what likely awaits all late-stage tech startups that have a decent run rate but whose IPO dreams have vanished. Private equity ownership hints at whether private equity people can see a profitable business (as in, we can do stuff with it and sell it later).

The data protection business Datto went public at the end of 2020 with Vista Private Equity partners holding 69% of the shares. Datto was then sold to Kaseya for $ 6.2 billion. There is money to be made here for PE companies.

Veritas, coincidentally, another data protection and security business, is in phase one owned by private equity, according to this calculation. The Carlyle Group bought it for $ 7.4 billion in January 2016. It’s a potential achievement for other data protection and security startups that fail to reach the IPO level but have reliable and persistent revenue streams. These are great bets by private equity players and can take years to play.

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