Compuware Goes Private in $2.5B Deal, Seeks Flexibility in Tech Wars

9/2/14Follow @XconomyDET

Compuware announced today that it has been purchased by Thoma Bravo, a private equity firm with offices in San Francisco and Chicago, for $2.5 billion. Under the terms of the agreement, Compuware shareholders will receive $10.92 per share, a 17 percent increase over the company’s closing stock price on Friday. Compuware’s board has approved the deal, but it still needs to be approved by shareholders and federal regulators. The acquisition is expected to be finalized early next year, and it’s not known whether Compuware will close its Detroit headquarters.

“Becoming a private company will enable this established market leader to leverage strategic product and other growth opportunities that will take Compuware to the next level,” Orlando Bravo, a managing partner at Thoma Bravo, said in a statement.

It’s expected that Compuware will split into two divisions—one focused on its mainframe business and one focused on its growing application performance management business.

Michigan’s largest tech company has long felt the heat from its board to cut costs, shrink staff, and solicit buyout offers. Earlier this year, it sold its non-core business units for $160 million. Last fall, Compuware also spun off its Covisint subsidiary, which provides a cloud-computing platform to customers mostly in the automotive and healthcare sectors, through an initial public offering.

But perhaps the most significant development in the company’s fortunes leading to today’s announcement was an unsuccessful, multibillion-dollar takeover attempt earlier this year by shareholder Elliot Management Corp.

Though Compuware didn’t respond to requests for comment today, Xconomy talked to Compuware CEO Bob Paul in February, and he discussed what it was like being an old-school technology company: “The way companies like us stay ahead of threats from Silicon Valley startups is through next-generation solutions. The size of Compuware has given us time to build next-generation capabilities and use performance analytics to solve problems that have never been solved before.” He ended the conversation by saying being acquired might be in the company’s near future.

Coach Wei, the CEO of Boston-based Yottaa, an IT startup working in the application performance management realm, said in an e-mail today that two fundamental market shifts are changing the entire IT landscape: “mobile first” and “cloud first.”

“Established vendors that own a significant piece of the traditional [technology] stack have to respond to these changes, [and] in the end, either rebuild or acquire,” Wei said.

In order to adapt, Wei believes, enterprise tech companies must retool their product offerings. For Compuware, that means taking a different path to compete with the big boys.

“These are like heart surgeries that take seismic efforts,” Wei said. “Giants like HP, IBM, and Oracle can acquire and get there. For these who are a little bit smaller, like BMC and Compuware, in order to rebuild at such a scale in such a fundamental way, going private [provides flexibility].”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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