The bear market of 2022 saw stock prices and valuations nosedive, offering plenty of opportunities for investors with a long-term focus to acquire assets or other companies at a discount.

Thoma Bravo, a private equity investor specializing in software technology, took advantage of these market conditions, scooping up strong companies at a reduced price. According to an analysis by American private financial and investing advice company, the Motley Fool, two notable themes in Thoma Bravo’s investments last year were fintech and cybersecurity.

Thoma Bravo has been relying on a “buy and build” strategy, the report notes, focusing primarily on companies that are solid but which are not yet category leaders, as well as businesses that are deficient in some area of their financial performance.

With interest rates on the rise and the prolonged bear market, tech businesses lacking in profitability or exhibiting slow growth struggled to secure funding on favorable terms, putting heighten financial burden on them.

Capitalizing on these circumstances, the firm made a series of fintech acquisitions in 2022, purchasing the likes of Anaplan, an American business planning software company; Bottomline, a provider of collaborative payment, invoice, and document automation solutions to corporations, financial institutions, and banks worldwide; Coupa, a business spend management specialist; and Mercell, a Norwegian provider of e-tendering and procurement systems. Recently Thomas Bravo also completed the acquisition of digital identity giant Forgerock

Thoma Bravo also invested in numerous fintech startups including FalconX, a cryptocurrency-as-a-service platform for banks and financial institutions; Personetics, a customer engagement platform for banks and financial institutions powered by artificial intelligence (AI); SMA Technologies, a task automation platform for financial institutions; and TRM Labs, a blockchain intelligence company that helps governments and crypto-related businesses investigate fraud.

Digitalization in the financial sector

Thoma Bravo’s strong focus on the fintech industry, and most particularly companies developing software and tools meant for banks and financial institutions, comes at a time when the traditional financial industry is experiencing a transformative digitalization wave.

In Europe, nearly all significant institutions have a digital transformation strategy in place, with most of their projects focusing on attracting and retaining market share, as well as achieving efficiency gains, a 2022 study by the European Central Bank’s Banking Supervision found.

The study, which polled banks across the bloc, found that 43% of these financial institutions’ top-five projects are aimed at revenue/customer experience enhancement.

Objectives of key digital projects, Source: Take-aways from the horizontal assessment of the survey on digital transformation and the use of fintech, European Central Bank Banking Supervision, Feb 2023

Application programming interfaces (APIs) and cloud computing were found to be the most commonly used technologies across banks. Cloud computing is perceived as the foundation for digital transformation.

Artificial intelligence (AI) is also used by most banks in the region with increasing business relevance. 60% of respondents indicated using AI with more use cases in development.

Distributed ledger technology, on the other hand, is only used by a very limited number of banks (less than 20%), with cryptocurrency-related activities and related exposures being very insignificant so far.

Adoption rates of innovative technologies, Source: Take-aways from the horizontal assessment of the survey on digital transformation and the use of fintech, European Central Bank Banking Supervision, Feb 2023

The survey also found that although most banks did not yet have a dedicated digital transformation budget, on average, one fifth of the IT budget was spent on digitalisation.

Digital transformation budget as percentage of operating income, Source: Take-aways from the horizontal assessment of the survey on digital transformation and the use of fintech, European Central Bank Banking Supervision, Feb 2023

Thoma Bravo is a leading private equity investment firm and one of the largest software investors in the world. Through its private equity, growth equity and credit strategies, the firm invests in growth-oriented, innovative companies operating in the software and technology sectors.

Over the past 20 years, Thoma Bravo has acquired or invested in more than 440 companies representing over US$250 billion in enterprise value. As of March 31, 2023, the firm had more than US$127 billion in assets under management, boasting a software portfolio of over 75 companies that generate more than US$26 billion of annual revenue.

According to its website, Thoma Bravo currently has 12 fintech companies in its portfolio. These companies include Adenza, a company that provides customers with end-to-end, trading, treasury, risk management and regulatory compliance platforms; Figment, a blockchain infrastructure and software provider; Greenphire, a clinical trial financial process automation specialist; and Solifi, an open finance startup.

Featured image credit: Edited from freepik