Massive Thoma Bravo Acquisition Of Cority Sends Shockwaves Through EHS Software Market
EHSQ software provider, Cority, announced on May 28th that Thoma Bravo, a US-headquartered private equity fund with $30 billion under management, had acquired a majority stake in the business. Prior investors Norwest Venture Partners and Georgian Partners have sold a significant portion of their shares to Thoma Bravo and will retain minority stakes in Cority. Terms of the deal were not disclosed. Given Cority’s 2018 revenue growth of 30%, the powerful economics of its multi-tenant product architecture and resulting operating margins of 20%, Verdantix calculates a core value of $378 million (CAN$510 million) and an upper valuation including strategic premium of $425 million (CAN$574 million). This reflects comparable acquisitions in the sector. One media report put the upper valuation of Cority at the sky-high level of $556 million (CAN$750 million). Even at $378-425 million, Cority achieved a valuation of approximately 26-30 times EBITDA.
Coming on the heels of other buyouts of EHSQ software vendors by large PE funds, such as CVC Growth and TCV, the Thoma Bravo purchase of a majority stake in Cority points to a strategic phase of growth in a market that has already existed for 30 years. Seasoned ‘buy and build’ funds such as Thoma Bravo do not make these moves without undertaking detailed due diligence. A key attribute of the EHS software market is the potential for long-term growth. According to Verdantix market size and forecast models, which have been refined over five years, spending by $1 billion revenue firms worldwide on EHS software will reach $1.2 billion during 2019. This is set to grow to $1.9 billion by 2024. Cority, along with other EHS software vendors, also has a strategy to tap the operational risk management software market, which will be worth $1.4 billion in 2019. Given both segments are only 25-30% penetrated, Cority has a long-term Total Addressable Market of $8-10 billion.
Cority is one of the most attractive assets from a financial perspective in the EHSQ software market, as the firm has been run with impressive strategic discipline, particularly over the last 5 years. The laser focus on delivering innovation on a multi-tenant, single instance architecture has ensured both growth and profitability for Cority, which it has publicly disclosed. In the Verdantix Green Quadrant EHS Software 2019, Cority is located within the Leaders quadrant, based on its platform’s strengths in occupational health, industrial hygiene, ergonomics, quality management, management of change (MOC), incidents, audits and inspections management. Cority’s software also scored highly in the Verdantix Green Quadrant Operational Risk Management Software 2019 by demonstrating reliable tools for incident management, emergency response, pre-start-up safety management and MOC.
The size of PE funds moving into the EHS software market – Thoma Bravo recently raised $12.6 billion for its Fund XIII focused on enterprise software – will force CEOs, investors and corporate owners of other EHS software assets to review their three-year strategies. To better understand market dynamics access the Green Quadrant for EHS Software 2019.