Why Thoma Bravo won’t IPO or sell a stake in itself

The software specialist has internal talks about accepting outside capital 'all the time', but likes things as they are, says co-founder Orlando Bravo.

At least seven alternatives managers including TPGArdianCVC Capital Partners and Clearlake Capital have either gone public or been rumoured to be mulling listings over the past 18 months. All the while, firms continue to sell minority stakes in themselves to GP stakes buyers.

For Orlando Bravo, managing partner and co-founder of tech specialist Thoma Bravo, this isn’t an option. His firm won’t change its ownership structure by listing or by taking on a third-party investor because it doesn’t want to change its culture, he told delegates at the IPEM conference in Cannes on Tuesday.

“We talk as a partnership all the time about this, [but] we like it as it is,” Bravo said. “Anything that could change the way we work internally and talk as a culture and collaborate, even if we make a lot of money [on] day one by doing so, anything that changes that, you have to think really really hard about.”

Culture isn’t the most important thing for a private equity firm – it is the only thing, he added.

Bravo said there are three areas his firm focuses on: raising capital, convincing sellers to part with companies and improving those companies. Accepting outside capital into the management company of a firm introduces a fourth area of focus, he added.

“How quickly are you growing for them? When are you going to go to market again? How big are the funds? How many products? You really start changing the way you think about adding value, and it could affect your relationship with your partners as well.”

Bravo is the latest industry figure to voice concerns over how changed ownership structures at GPs can affect relationships with stakeholders. In May, Swedish insurer Skandia Asset Management‘s head of private equity and infrastructure told Private Equity International that it was difficult for LPs to understand the impact of an IPO on a manager’s organisation and culture, adding that the risk that a listed GP will focus more on growing AUM than maximising the value of a fund’s portfolio was a concern.

“It’s a fascinating paradox,” Daniel Winther said. “You made your success investing in unlisted companies, but you yourselves are so fascinated about becoming listed.”

Skandia is a fan of private equity because of its superior model of ownership, Winther added.

“You don’t have the shareholders, you don’t have the quarterly reporting, you don’t have all the compliance, you don’t have a majority. You have different shareholders with different incentives. You have so many other things that distort you from making great investments.”

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