The Wire

Dec. 17, 2020

The SolarWinds hack and private equity, First-timer Diversis exits ArrowStream, Leonard Green runs secondary on older fund

Morning!

 

Hack: As much as the presidential election has divided this country, we had a stark reminder this week that enemies outside our borders are on constant lookout for vulnerabilities.

 

That became apparent earlier this week with news that several governmental agencies and potential private companies were compromised in what is being described as possibly the most significant cyberattack on the U.S. government.

 

The hackers, suspected to be Russian, waged the months-long campaign by exploiting apparently lax security in networks maintained by Texas-based SolarWinds, a public company backed by Thoma Bravo and Silver Lake.

 

The two firms acquired SolarWinds in 2016 in a take-private transaction valued at $4.5 billion. The firms, which own around 70 percent of SolarWinds, took the company public again in 2018.

 

On Dec. 7, the two firms sold shares in the company as part of a private placement process with an institutional investor that had been negotiated for some period of time (weeks or months, I’m not clear). The sale closed six days before news of the security breach went public.

 

According to Seeking Alpha, Silver Lake sold $158 million and Thoma Bravo sold $128 million of shares on Dec. 7.

 

“Thoma Bravo and Silver Lake were not aware of this potential cyberattack at SolarWinds prior to entering into a private placement to a single institutional investor on 12/7,” according to a joint statement from the firms.

 

Read the full wire commentary on PE Hub.

 

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Note to Readers: It's that time of year ... for the 21st time, the editors of PE Hub and Buyouts honor exceptional buyouts with our Deal of the Year Awards.

 

Winners are chosen in seven categories: Deal of the Year, Large-Market Deal of the Year, Middle-Market Deal of the Year, Small-Market Deal of the Year, Turnaround of the Year, International Deal of the Year, and Secondaries Deal of the Year.

 

Go here for more information and to read about rules and methodology. Also check out past winners. Last year, New Mountain took the crown with its exit of Equian.

 

If you have additional questions, email Private Equity Editor Chris Witkowsky at [email protected].

 

Also of note (may require subscriptions)

Older Funds: Leonard Green is working on a process to move assets out of its 2007 fund and into a continuation pool, giving the GP more time to manage the investments. The firm is the latest in a series of blue-chip GPs using the secondary market to sort out older investments. Read it here on Buyouts.