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Darktrace shares slide as takeover talks with Thoma Bravo break down

Darktrace shares plunge more than 30% as takeover talks with private equity firm Thoma Bravo break down

  • Discussions between Darktrace and Thoma Bravo were first revealed last month
  • Darktrace recovered to net profit of $1.5 million in the 12 months to the end of June
  • Controversial tech boss Mike Lynch has been a prominent supporter of Darktrace

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Shares in Darktrace have plummeted after the cybersecurity provider revealed that takeover negotiations with US investment group Thoma Bravo had ended.

Discussions between the pair were first revealed last month, raising concerns that the London Stock Exchange might lose another tech company to a private equity predator.

Following that announcement, Thoma Bravo, a specialist investor in the tech industry, was given until next Monday to make a concrete proposal or walk away.

Takeover Concern: Darktrace revealed last week that it was in talks with US buyout group Thoma Bravo over a cash offer

Falling value: Darktrace shares were the biggest faller on the FTE 350 Index this morning, diving 34.7 percent to £3.36 just before 11am

City’s takeover rules now require it to wait at least six months before making a new offer unless another company reveals a competing bid for Darktrace.

“There were discussions with Thoma Bravo at the beginning about a possible offer for the company, but no agreement could be reached on the terms of a firm offer,” Darktrace told investors.

Darktrace Shares were by some distance the biggest faller on the FTE 350 this morning, diving 30 percent to 356.7p, meaning their value has fallen by more than half in the past 12 months.

This is despite the Cambridge-based group reporting impressive full-year results showing a recovery to modest profits on the back of strong sales growth in all markets.

The company posted a net profit of $1.5 million in the 12 months to the end of June, compared to a loss of $145.8 million last year when it incurred heavy borrowing costs related to debt securities handed over to certain investors.

Operating expenses also rose more modestly than usual due to Covid-related restrictions that suppressed spending on travel, entertainment and facilities for much of the period.

Secure: Darktrace designs AI_based software that helps organizations protect against cyber threats.  Customers include Formula 1 team McLaren Racing (photo)

Secure: Darktrace designs AI_based software that helps organizations protect against cyber threats.  Customers include Formula 1 team McLaren Racing (photo)

Secure: Darktrace designs AI_based software that helps organizations protect against cyber threats. Customers include Formula 1 team McLaren Racing (photo)

But profitability mainly benefited from total sales, which increased 45.7 percent to $415.5 million thanks to the expansion of Darktrace’s customer base by about a third.

Darktrace uses artificial intelligence to design software that helps protect organizations from cyberthreats ranging from ransomware, email phishing and software-as-a-service attacks.

Companies that have used his services include brewing giant ABInBev, Formula 1 team McLaren Racing and civil engineer Sir Robert McAlpine, as well as British intelligence.

One of the most well-known lenders is Mike Lynch, who may be extradited to the US over fraud charges stemming from the sale of enterprise software group Autonomy to HP for $11.6 billion.

Lynch, who has denied all the allegations, has said the US authorities’ “vengeful” campaign has depressed Darktrace’s share price, making it more vulnerable to a takeover.

Michael Hewson, chief market analyst at CMC Markets UK, said the failure of talks between Darktrace and Thoma Bravo is a “mixed boon” for London’s financial markets.

He added: ‘On the one hand it is [Darktrace] has been touted as an award-winning pioneer in cybersecurity, a sector that is more important than ever in these trying times and the Russian invasion of Ukraine.

“On the other hand, there are questions about the ties to Autonomy owner Mike Lynch and some investors are wondering how deep these ties go.

“There have also been questions about the amount of money the company is spending on R&D, which it claims is too low for such an important industry.”

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