SolarWinds Bought for $4.5B in Austin’s Second Megadeal

Austin, TX has attracted attention for its rapid population growth in recent years. But after SolarWinds (NYSE: SWI) announced the region’s second multibillion-dollar deal this month, megamergers may be turning into Austin’s calling card.

Private equity firms Thoma Bravo and Silver Lake Partners are taking Austin-based SolarWinds private in a deal valued at $4.5 billion. SolarWinds, which was founded in 1999 and became a publicly traded company in 2009, sells software meant to help manage computer networks for businesses, governments, and schools.

For private equity firms to pay such a hefty price tag for a company with $78.1 million of 2014 net income, Chicago-based Thoma Bravo and Menlo Park, CA-based Silver Lake must see the potential to dramatically grow the business as a private company, without the possible limitations public markets can bring. In a prepared statement, Thoma Bravo managing partner Seth Boro said the firm’s plan to accelerate “growth initiatives in Cloud, Hybrid, and MSP (managed service provider) environments.”

Silver Lake has been active in Texas over the past few years, starting with the take-private buyout of Round Rock, TX-based Dell along with founder Michael Dell in 2013 for almost $25 billion. (Round Rock neighbors Austin to the north.) Then, just last week, Dell announced it would acquire Hopkinton, MA-based EMC (NYSE: EMC) for $67 billion in the largest technology deal in history.

The per-share price that the private equity firms are paying for SolarWinds, $60.10, is a 43.5 percent premium to the company’s trading price on Oct. 8, SolarWinds said in a statement. Since its $112.5 million IPO in 2009, SolarWinds has focused on expanding its customer base nationally and internationally through increased marketing, product development, and acquisitions, such as the 2013 purchase of Boulder, CO-based Confio Software.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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