PE Firm Francisco Partners to Purchase Sumo Logic for $1.7BFrancisco's $12.05-Per-Share Bid Comes 29 Months After Analytics Vendor Went Public
Francisco Partners has joined Thoma Bravo and Vista Equity Partners in the take-private cybersecurity spree, agreeing to buy data analytics vendor Sumo Logic for $1.7 billion.
The Silicon Valley-based company says the $12.05-per-share offer from the San Francisco-based private equity firm will allow Sumo Logic to expand its market opportunity, innovate on critical solutions, accelerate growth and further its vision. Francisco Partners' offer represents a 57% premium to Sumo Logic's Jan. 20 closing price, which was the last full trading day before The Information reported on a potential deal (see: What Makes Sumo Logic an Appealing Target for Private Equity).
"The Sumo Logic board conducted a thorough evaluation of strategic alternatives and spoke with a number of strategic and financial partners," Lead Independent Director Chuck Robel says in a statement. "The transaction with Francisco Partners delivers a substantial premium and a compelling cash value to our stockholders."
Sumo Logic's stock fell $0.28 - or 2.3% - to $11.90 per share in trading early Thursday since Francisco's bid came in below the company's Wednesday closing stock price of $12.18 per share. The Information reported Jan. 23 that Thoma Bravo, Vista Equity Partners and Francisco Partners each had approached Sumo about a possible deal, and The Wall Street Journal on Wednesday said a deal with Francisco was coming.
"Sumo Logic is ideally positioned to capitalize on the large and growing demand from enterprises."
– Brian Decker and Evan Daar, partners, Francisco Partners
The acquisition has been unanimously approved by Sumo Logic's board and is expected to close in the second quarter of 2023. The Francisco Partners transaction values Sumo Logic at 22.7% less than when the company first went public 29 months ago. Sumo Logic raised $325.6 million on a market cap of $2.2 billion during the company's September 2020 initial public offering.
"Sumo Logic is ideally positioned to capitalize on the large and growing demand from enterprises for observability and security solutions," Brian Decker and Evan Daar, partners at Francisco Partners, say in a statement. "Its leading, cloud-native analytics platform provides the scalability and insights required as applications and data proliferate in today's digital world."
Sumo Logic declined Information Security Media Group's request for an interview, and Francisco Partners didn't immediately respond to an ISMG request for additional comment.
'We Have Created a Trusted, Cloud-Native SaaS Analytics Platform'
Sumo Logic's revenue climbed to $220.9 million during the first nine months of 2022, up 26.2% from $175.1 million a year earlier. At the same time, however, the company's net loss increased to $96.9 million, 7.9% worse than a net loss of $89.8 million the year prior.
"Since founding Sumo Logic in 2010, we have created a trusted, cloud-native SaaS analytics platform for observability and security, enabling our customers to transform complexity into insights and accelerate their cloud transformation adoption," Sumo Logic President and CEO Ramin Sayar says in a statement. "Today's announcement represents a compelling outcome for shareholders."
Sumo Logic has made a pair of acquisitions since going public. It scooped up SOAR provider DFLabs for $41.7 million in March 2021 to accelerate threat detection, analysis, incident response and forensic investigations, and it acquired open-source monitoring provider Sensu for $32.7 million in June 2021 to provide customers with an affordable, extensible and scalable tool for infrastructure and application monitoring (see: Sumo Logic CEO on Using Data to Improve Security Posture).
"What we've done is cloudify what they [DFLabs] have productized and integrate it to the number one logging platform and our SIEM product to help both enterprise customers - as well as MSPs that they serve - accelerate their journey to automation and analytics," Sayar told ISMG in September 2022.
Sumo Logic's technology is well regarded by industry analysts. Gartner in October 2022 named the company a visionary in the SIEM market behind category leaders Microsoft, IBM, Splunk, Securonix and Exabeam. Then, in December 2022, Forrester recognized Sumo Logic as a visionary in the security analytics market behind category leaders Elastic, Splunk and Microsoft.
"Customers realize they're able to have a confident approach with Sumo of how to get from where they are today to where they need to be," Sayar told ISMG in September. "They may leave the old SIEM for the legacy environment and bring in Sumo to address their new environment. Gradually, as they migrate data, infrastructure, apps and users, then they're already covered. We typically win because of that."
The company in the first quarter of 2022 realigned its go-to-market team to focus on new customer acquisition, and during the first half of 2022 it brought in new regional leaders that understand the rigor and discipline needed to oversee a global sales organization. More recently, Sumo Logic has focused on shifting from channel-fulfilled to channel-sourced sales opportunities to boost its reach and efficiency.
The sales changes came months after Sumo Logic snagged top McAfee Enterprise go-to-market executive Lynne Doherty for a newly created role leading the company's worldwide field operations. She assumed many of the responsibilities held by Steve Fitz, who served as Sumo Logic's chief revenue officer from October 2016 to February 2022 before assuming the same role at Invicti Security.
Sumo Logic Joins Forcepoint, SonicWall in Francisco's Portfolio
Francisco Partners has a limited footprint in the cybersecurity market. When the private equity firm purchased platform security vendor Forcepoint for $1.1 billion in January 2021, it installed Manny Rivelo as CEO. It carried out steep layoffs in March and acquired remote browser isolation vendor Cyberinc, threat removal startup Deep-Secure and cloud access security broker Bitglass over the course of 2021.
Then in July 2022, Francisco sold its stake in SMB security stalwart WatchGuard Technology to Vector Capital - which became majority owner - in a transaction valued at $1.5 billion. Since 2016, Francisco Partners has owned platform security firm SonicWall alongside activist hedge fund Elliott Management, though the two were rumored to be preparing to sell SonicWall in June 2021, PE Hub reported.
"We are excited to invest in Sumo Logic and support its mission to make the world's digital experiences reliable and safe," Francisco Partners Principal Karl Shum says in a statement.
Private equity firms have capitalized on the economic downturn to acquire publicly traded cybersecurity vendors at a steep discount. No firm has capitalized on the good deals more than Thoma Bravo, which in 2022 agreed to spend $12 billion on three identity protection goliaths: SailPoint, Ping Identity and ForgeRock. Thoma Bravo also talked with Darktrace but couldn't agree on terms.
Vista Equity Partners also got in on the take-private action, acquiring security awareness training vendor KnowBe4 last week at a $4.6 billion valuation (see: Sumo Logic CEO on Using Data to Improve Security Posture).